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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended May 28, 2006

OR



| ̈ | 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 000-51035

UAP Holding Corp.

(Exact Name of Registrant as Specified in Its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 11-3708834                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|7251 W. 4thStreet, Greeley,
Colorado     |  | 80634     
|(Address of Principal Executive Offices) |  | (Zip Code)

(970) 356-4400

(Registrants Telephone Number, Including Area Code)

Not applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer
and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer ̈Accelerated filer  x                Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ̈No  x



|                                         |  |                            
|---------------------------------------- |  | ---------------------------
|Class                                    |  | Outstanding at July 3, 2006
|Common Stock, par value $0.001 per share |  | 50,967,958 shares          



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TABLE OF CONTENTS



|                                                                                              |  |   
|--------------------------------------------------------------------------------------------- |  | --
|Part I. Financial Information                                                                 |  | 3 
|ITEM 1. FINANCIAL STATEMENTS                                                                  |  | 3 
|Report of Independent Registered Public Accounting Firm                                       |  | 3 
|Condensed Consolidated Balance Sheets                                                         |  | 4 
|Condensed Consolidated Statements of Earnings                                                 |  | 5 
|Condensed Consolidated Statements of Cash Flows                                               |  | 6 
|Condensed Consolidated Statement of Stockholders Equity                                      |  | 7 
|Notes to Condensed Consolidated Financial Statements                                          |  | 8 
|ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 17
|ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 26
|ITEM 4. CONTROLS AND PROCEDURES                                                               |  | 27
|Part II. Other Information                                                                    |  | 28
|ITEM 6. EXHIBITS                                                                              |  | 28
|SIGNATURES                                                                                    |  | 29



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PART I. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of UAP Holding Corp.

Greeley, Colorado

We have reviewed the accompanying
condensed consolidated balance sheets of UAP Holding Corp. and subsidiaries (the Company) as of May 28, 2006, and May 29, 2005, the related condensed consolidated statements of earnings for the 13-week period ended May 28,
2006, and the 13-week period ended May 29, 2005, the condensed consolidated statements of cash flows for the 13-week period ended May 28, 2006, and the 13-week period ended May 29, 2005, and the condensed consolidated statement of
stockholders equity for the 13-week period ended May 28, 2006. These interim financial statements are the responsibility of the Companys management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical
procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United
States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheet of UAP Holding Corp. and subsidiaries as of February 26, 2006, and the related consolidated statements of earnings, stockholders equity, and cash flows for the year then ended (not presented herein) and in our report
dated May 10, 2006, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of February 26, 2006, is fairly
stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

DELOITTE & TOUCHE LLP

Denver, Colorado

July 6, 2006



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UAP HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share and per share amounts)

UNAUDITED



|                                                                                                                                        |  |             |           |   |                  |   |           |             |  |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | --------- | - | ---------------- | - | --------- | ----------- |  | - | --------- | -
|                                                                                                                                        |  | May 28,2006 |           |   | February 26,2006 |   |           | May 29,2005 | 
|ASSETS                                                                                                                                  |  |             |           |   |                  |   |           |             |  |   |           |  
|Current assets:                                                                                                                         |  |             |           |   |                  |   |           |             |  |   |           |  
|Cash and cash equivalents                                                                                                               |  | $           | 29,800    |   |                  | $ | 79,168    |             |  | $ | 15,779    |  
|Receivables, less allowance for doubtful accounts of $14,634, $12,770 and $15,524                                                       |  |             | 1,131,516 |   |                  |   | 288,879   |             |  |   | 1,009,097 |  
|Inventories                                                                                                                             |  |             | 714,215   |   |                  |   | 730,771   |             |  |   | 681,913   |  
|Deferred income taxes                                                                                                                   |  |             | 21,546    |   |                  |   | 21,168    |             |  |   | 21,223    |  
|Vendor prepay                                                                                                                           |  |             | 9,833     |   |                  |   | 69,841    |             |  |   | 33,360    |  
|Other current assets                                                                                                                    |  |             | 5,642     |   |                  |   | 16,123    |             |  |   | 5,978     |  
|                                                                                                                                        |  |             |           |   |                  |   |           |             |  |   |           |  
|Total current assets                                                                                                                    |  |             | 1,912,552 |   |                  |   | 1,205,950 |             |  |   | 1,767,350 |  
|Property, plant and equipment                                                                                                           |  |             | 119,264   |   |                  |   | 114,991   |             |  |   | 107,414   |  
|Less accumulated depreciation                                                                                                           |  |             | (26,793   | ) |                  |   | (24,676   | )           |  |   | (17,876   | )
|                                                                                                                                        |  |             |           |   |                  |   |           |             |  |   |           |  
|Property, plant and equipment, net                                                                                                      |  |             | 92,471    |   |                  |   | 90,315    |             |  |   | 89,538    |  
|Goodwill                                                                                                                                |  |             | 35,551    |   |                  |   | 27,167    |             |  |   | 34,645    |  
|Intangible assets, net                                                                                                                  |  |             | 26,255    |   |                  |   | 26,121    |             |  |   | 25,561    |  
|Deferred income taxes                                                                                                                   |  |             | 8,674     |   |                  |   | 9,951     |             |  |   | 7,544     |  
|Debt issue costs, net                                                                                                                   |  |             | 15,957    |   |                  |   | 17,155    |             |  |   | 20,186    |  
|Investment in unconsolidated affiliates                                                                                                 |  |             |          |   |                  |   | 4,166     |             |  |   | 3,360     |  
|Other assets                                                                                                                            |  |             | 1,715     |   |                  |   | 1,085     |             |  |   | 784       |  
|                                                                                                                                        |  |             |           |   |                  |   |           |             |  |   |           |  
|Total assets                                                                                                                            |  | $           | 2,093,175 |   |                  | $ | 1,381,910 |             |  | $ | 1,948,968 |  
|                                                                                                                                        |  |             |           |   |                  |   |           |             |  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                    |  |             |           |   |                  |   |           |             |  |   |           |  
|Current liabilities:                                                                                                                    |  |             |           |   |                  |   |           |             |  |   |           |  
|Accounts payable                                                                                                                        |  | $           | 1,408,791 |   |                  | $ | 819,071   |             |  | $ | 1,306,343 |  
|Short-term debt                                                                                                                         |  |             | 133,784   |   |                  |   |          |             |  |   |          |  
|Other accrued liabilities                                                                                                               |  |             | 116,189   |   |                  |   | 73,962    |             |  |   | 122,551   |  
|Income taxes payable                                                                                                                    |  |             | 24,901    |   |                  |   |          |             |  |   | 35,379    |  
|Deferred income taxes                                                                                                                   |  |             | 1,496     |   |                  |   | 1,433     |             |  |   | 108       |  
|                                                                                                                                        |  |             |           |   |                  |   |           |             |  |   |           |  
|Total current liabilities                                                                                                               |  |             | 1,685,161 |   |                  |   | 894,466   |             |  |   | 1,464,381 |  
|Long-term debt                                                                                                                          |  |             | 175,347   |   |                  |   | 306,339   |             |  |   | 298,456   |  
|Other non-current liabilities                                                                                                           |  |             | 1,854     |   |                  |   | 1,890     |             |  |   | 3,645     |  
|Deferred income taxes                                                                                                                   |  |             | 19,152    |   |                  |   | 19,476    |             |  |   | 23,156    |  
|Commitments and contingencies (note 9)                                                                                                  |  |             |           |   |                  |   |           |             |  |   |           |  
|Stockholders equity:                                                                                                                   |  |             |           |   |                  |   |           |             |  |   |           |  
|Common stock, $.001 par value, 90,000,000 shares authorized, 50,967,958, 50,814,430 and 50,434,372 issued and outstanding,
respectively |  |             | 51        |   |                  |   | 51        |             |  |   | 50        |  
|Management stock  rabbi trust                                                                                                          |  |             | 1,978     |   |                  |   | 3,956     |             |  |   | 4,819     |  
|Additional paid-in capital                                                                                                              |  |             | 121,661   |   |                  |   | 117,392   |             |  |   | 110,036   |  
|Retained earnings                                                                                                                       |  |             | 81,377    |   |                  |   | 32,606    |             |  |   | 41,547    |  
|Accumulated other comprehensive income                                                                                                  |  |             | 6,594     |   |                  |   | 5,734     |             |  |   | 2,878     |  
|                                                                                                                                        |  |             |           |   |                  |   |           |             |  |   |           |  
|Stockholders equity                                                                                                                    |  |             | 211,661   |   |                  |   | 159,739   |             |  |   | 159,330   |  
|                                                                                                                                        |  |             |           |   |                  |   |           |             |  |   |           |  
|Total liabilities and stockholders equity                                                                                              |  | $           | 2,093,175 |   |                  | $ | 1,381,910 |             |  | $ | 1,948,968 |  
|                                                                                                                                        |  |             |           |   |                  |   |           |             |  |   |           |  

The accompanying notes are an integral part of the condensed consolidated financial statements.



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UAP HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in thousands, except share and earnings per share amounts)

UNAUDITED



|                                                         |  |                      |            |   |              |   |            |  
|-------------------------------------------------------- |  | -------------------- | ---------- | - | ------------ | - | ---------- | -
|                                                         |  | Thirteen Weeks Ended |           
|                                                         |  | May 28, 2006         |            |   | May 29, 2005 |  
|Net sales                                                |  | $                    | 1,398,023  |   |              | $ | 1,356,910  |  
|Costs and expenses:                                      |  |                      |            |   |              |   |            |  
|Cost of goods sold                                       |  |                      | 1,212,374  |   |              |   | 1,187,739  |  
|                                                         |  |                      |            |   |              |   |            |  
|Gross profit                                             |  |                      | 185,649    |   |              |   | 169,171    |  
|Selling, general and administrative expenses             |  |                      | 88,974     |   |              |   | 86,348     |  
|Gain on sale of assets                                   |  |                      | (250       | ) |              |   | (18        | )
|Restructuring costs                                      |  |                      | 108        |   |              |   | 396        |  
|Royalties, service charges and other income and expenses |  |                      | (7,206     | ) |              |   | (7,761     | )
|                                                         |  |                      |            |   |              |   |            |  
|Operating income                                         |  |                      | 104,023    |   |              |   | 90,206     |  
|                                                         |  |                      |            |   |              |   |            |  
|Interest expense                                         |  |                      | 8,289      |   |              |   | 8,328      |  
|Finance related and other charges                        |  |                      | 482        |   |              |   |           |  
|                                                         |  |                      |            |   |              |   |            |  
|Income before income taxes                               |  |                      | 95,252     |   |              |   | 81,878     |  
|Income tax expense                                       |  |                      | 36,936     |   |              |   | 32,491     |  
|                                                         |  |                      |            |   |              |   |            |  
|Net income                                               |  | $                    | 58,316     |   |              | $ | 49,387     |  
|                                                         |  |                      |            |   |              |   |            |  
|Earnings per share:                                      |  |                      |            |   |              |   |            |  
|Basic                                                    |  | $                    | 1.15       |   |              | $ | 0.98       |  
|Diluted                                                  |  | $                    | 1.11       |   |              | $ | 0.94       |  
|Cash dividends declared per share of common stock        |  | $                    | 0.1875     |   |              | $ | 0.125      |  
|Weighted average shares outstanding:                     |  |                      |            |   |              |   |            |  
|Basic                                                    |  |                      | 50,851,510 |   |              |   | 50,432,696 |  
|Diluted                                                  |  |                      | 52,370,178 |   |              |   | 52,261,501 |  

The accompanying notes are an integral part of the condensed consolidated financial statements.



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UAP HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

UNAUDITED



|                                                                                           |  |                                 |          |   |                                 |   |          |  
|------------------------------------------------------------------------------------------ |  | ------------------------------- | -------- | - | ------------------------------- | - | -------- | -
|                                                                                           |  | ThirteenWeeks EndedMay 28, 2006 |          |   | ThirteenWeeks EndedMay 29, 2005 |  
|Operations                                                                                 |  |                                 |          |   |                                 |   |          |  
|Net income                                                                                 |  | $                               | 58,316   |   |                                 | $ | 49,387   |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities |  |                                 |          |   |                                 |   |          |  
|Depreciation                                                                               |  |                                 | 2,876    |   |                                 |   | 2,845    |  
|Amortization of intangibles                                                                |  |                                 | 433      |   |                                 |   | 340      |  
|Amortization of debt issuance costs                                                        |  |                                 | 1,100    |   |                                 |   | 1,119    |  
|Accretion of discount on notes                                                             |  |                                 | 2,792    |   |                                 |   | 2,508    |  
|Gain on sales of fixed assets                                                              |  |                                 | (250     | ) |                                 |   | (18      | )
|Equity in losses of unconsolidated affiliates                                              |  |                                 |         |   |                                 |   | 711      |  
|Deferred tax benefit (provision)                                                           |  |                                 | 646      |   |                                 |   | (4,969   | )
|Stock compensation                                                                         |  |                                 | 836      |   |                                 |   | 173      |  
|Changes in operating assets and liabilities                                                |  |                                 | (108,644 | ) |                                 |   | (104,082 | )
|                                                                                           |  |                                 |          |   |                                 |   |          |  
|Net cash used for operations                                                               |  |                                 | (41,895  | ) |                                 |   | (51,986  | )
|Investing                                                                                  |  |                                 |          |   |                                 |   |          |  
|Additions to property, plant and equipment                                                 |  |                                 | (6,703   | ) |                                 |   | (3,215   | )
|Proceeds from sales of assets held for sale                                                |  |                                 | 7,542    |   |                                 |   | 381      |  
|Acquisition of businesses                                                                  |  |                                 | (13,627  | ) |                                 |   |         |  
|                                                                                           |  |                                 |          |   |                                 |   |          |  
|Net cash used for investing                                                                |  |                                 | (12,788  | ) |                                 |   | (2,834   | )
|Financing                                                                                  |  |                                 |          |   |                                 |   |          |  
|Checks not yet presented                                                                   |  |                                 | 12,906   |   |                                 |   | 23,621   |  
|Net payments on revolving line of credit                                                   |  |                                 |         |   |                                 |   | (55      | )
|Debt issuance costs                                                                        |  |                                 | (27      | ) |                                 |   | (1,046   | )
|Dividends paid                                                                             |  |                                 | (9,528   | ) |                                 |   |         |  
|Excess tax benefits from stock based compensation arrangements                             |  |                                 | 1,572    |   |                                 |   |         |  
|Proceeds from common stock options exercised                                               |  |                                 | 150      |   |                                 |   |         |  
|                                                                                           |  |                                 |          |   |                                 |   |          |  
|Net cash provided by financing                                                             |  |                                 | 5,073    |   |                                 |   | 22,520   |  
|                                                                                           |  |                                 |          |   |                                 |   |          |  
|Net change in cash and cash equivalents                                                    |  |                                 | (49,610  | ) |                                 |   | (32,300  | )
|Net effect of exchange rates on cash and cash equivalents                                  |  |                                 | 242      |   |                                 |   | (125     | )
|                                                                                           |  |                                 |          |   |                                 |   |          |  
|Net change in cash and cash equivalents                                                    |  |                                 | (49,368  | ) |                                 |   | (32,425  | )
|Cash and cash equivalents at beginning of period                                           |  |                                 | 79,168   |   |                                 |   | 48,204   |  
|                                                                                           |  |                                 |          |   |                                 |   |          |  
|Cash and cash equivalents at end of period                                                 |  | $                               | 29,800   |   |                                 | $ | 15,779   |  
|                                                                                           |  |                                 |          |   |                                 |   |          |  
|Supplemental disclosure of cash flow information:                                          |  |                                 |          |   |                                 |   |          |  
|Cash paid during the period for interest                                                   |  | $                               | 662      |   |                                 | $ | 797      |  
|Net cash paid (refunded) during the period for income taxes                                |  | $                               | 1,251    |   |                                 | $ | (5,291   | )
|Dividends declared but not yet paid                                                        |  | $                               | 9,545    |   |                                 | $ | 6,305    |  

The accompanying notes are an integral part of the condensed consolidated financial statements.



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UAP HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(dollars in thousands)

UNAUDITED



|                                                               |  |             |    |             |   |        |                          |  |   |                  |   |  |                                     |        |                          |  |   |       |  |   |         |  
|-------------------------------------------------------------- |  | ----------- | -- | ----------- | - | ------ | ------------------------ |  | - | ---------------- | - |  | ----------------------------------- | ------ | ------------------------ |  | - | ----- |  | - | ------- | -
|                                                               |  | CommonStock |    | Rabbi Trust |   |        | AdditionalPaid inCapital |  |   | RetainedEarnings |   |  | AccumulatedOtherComprehensiveIncome |        | TotalStockholdersEquity | 
|Thirteen Weeks Ended May 28, 2006                              |  |             |    |             |   |        |                          |  |   |                  |   |  |                                     |        |                          |  |   |       |  |   |         |  
|Balance at February 26, 2006                                   |  | $           | 51 |             | $ | 3,956  |                          |  | $ | 117,392          |   |  | $                                   | 32,606 |                          |  | $ | 5,734 |  | $ | 159,739 |  
|Dividends to stockholders                                      |  |             |   |             |   |       |                          |  |   |                 |   |  |                                     | (9,545 | )                        |  |   |      |  |   | (9,545  | )
|Rabbi trust distribution                                       |  |             |   |             |   | (1,978 | )                        |  |   | 1,978            |   |  |                                     |       |                          |  |   |      |  |   |        |  
|Stock options exercised                                        |  |             |   |             |   |       |                          |  |   | 300              |   |  |                                     |       |                          |  |   |      |  |   | 300     |  
|Stock compensation  stock options and restricted stock units  |  |             |   |             |   |       |                          |  |   | 836              |   |  |                                     |       |                          |  |   |      |  |   | 836     |  
|Stock and stock option income tax benefits                     |  |             |   |             |   |       |                          |  |   | 1,572            |   |  |                                     |       |                          |  |   |      |  |   | 1,572   |  
|Holdback for taxes on restricted stock units vested and issued |  |             |   |             |   |       |                          |  |   | (417             | ) |  |                                     |       |                          |  |   |      |  |   | (417    | )
|Comprehensive income:                                          |  |             |    |             |   |        |                          |  |   |                  |   |  |                                     |        |                          |  |   |       |  |   |         |  
|Net income                                                     |  |             |   |             |   |       |                          |  |   |                 |   |  |                                     | 58,316 |                          |  |   |      |  |   | 58,316  |  
|Foreign currency translation adjustment                        |  |             |   |             |   |       |                          |  |   |                 |   |  |                                     |       |                          |  |   | 860   |  |   | 860     |  
|                                                               |  |             |    |             |   |        |                          |  |   |                  |   |  |                                     |        |                          |  |   |       |  |   |         |  
|Total comprehensive income                                     |  |             |   |             |   |       |                          |  |   |                 |   |  |                                     | 58,316 |                          |  |   | 860   |  |   | 59,176  |  
|                                                               |  |             |    |             |   |        |                          |  |   |                  |   |  |                                     |        |                          |  |   |       |  |   |         |  
|Balance at May 28, 2006                                        |  | $           | 51 |             | $ | 1,978  |                          |  | $ | 121,661          |   |  | $                                   | 81,377 |                          |  | $ | 6,594 |  | $ | 211,661 |  
|                                                               |  |             |    |             |   |        |                          |  |   |                  |   |  |                                     |        |                          |  |   |       |  |   |         |  

The accompanying notes are an integral part of the condensed consolidated financial statements.



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UAP HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen Week Period Ended May 28, 2006, and the Thirteen Week Period Ended May 29, 2005

UNAUDITED

1. Description of the Business and
Significant Accounting Policies

Interim Financial Statements.The accompanying unaudited condensed consolidated financial statements of
UAP Holding Corp. and its subsidiaries (the Company, UAP we, us, our) have been prepared in accordance with accounting principles generally accepted in the United States of America
(GAAP) for interim financial information and reflect all adjustments (consisting of normal recurring accruals and changes in estimates) which, in the opinion of management, are necessary for a fair presentation of the financial position,
operating results, and cash flows for the periods presented. These financial statements should be read in conjunction with the consolidated and combined financial statements and notes thereto contained in our Annual Report on Form 10-K for the
fiscal year ended February 26, 2006.

Business.UAP is the largest independent distributor of agricultural and professional non-crop
inputs in the United States and Canada. We market a comprehensive line of products including chemicals, fertilizer, and seed to farmers, commercial growers, and regional dealers. We have approximately 340 distribution, storage, and sales locations.
We also have three formulation facilities where we blend products primarily for sale by our distribution facilities.

UAP began distribution operations in
November 2003 when it acquired ConAgra Foods United States and Canadian Agricultural Products Businesses, excluding its wholesale fertilizer and other international crop distribution businesses.

On November 29, 2004, we consummated the initial public offering of our common stock, which is traded under the symbol UAPH on the NASDAQ National
Market.

Principles of Consolidation.The condensed consolidated financial statements include our accounts and the accounts of all our
wholly-owned subsidiaries. Significant intercompany balances and transactions are eliminated. Investments in 50% or less owned affiliates over which we do not have the ability to exercise significant control are accounted for using the equity
method. During the first quarter of fiscal 2007 and fiscal year 2006, we did not have any less than 20% owned investments in affiliates accounted for under the equity method.

Fiscal Year.Our fiscal year operates on a 52- or 53-week period, ending on the last Sunday in February. Our fiscal years 2007 and 2006 contain 52 weeks.

Seasonality.Our and our customers businesses are seasonal, based upon the planting, growing, and harvesting cycles. During fiscal years 2004 through
2006, more than 75% of our net sales occurred during the first and second fiscal quarters of each year because of the condensed nature of the planting season. Because of the seasonality of sales, we experience significant fluctuations in our
revenues, income, and net working capital levels. In addition, weather conditions can significantly vary quarterly results.

Since our suppliers typically
operate on a crop year, which is a different year than our fiscal year, our rebate agreements with our suppliers are estimated throughout the year and adjusted, as necessary, typically in our fiscal third and fourth quarters. These adjustments can
impact our margin percentages by quarter. In addition, our customers operate on a crop year and payments are cyclical throughout the year. Accordingly, our results of operations over any one quarter are not necessarily indicative of the results to
be expected over the full fiscal year.

Use of Estimates.The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions. These estimates or assumptions affect reported amounts of assets, liabilities, revenue, and expenses as reflected in the financial statements.
Actual results could differ from those estimates and the differences could be material. Estimates are also required for other items.

Vendor Rebates
Receivable. At the beginning of each crop year, we enter into agreements with many of our suppliers providing for rebates upon the achievement of specified volume purchasing or sales levels. Most of these rebates are covered by binding
arrangements or published programs. Rebates that are probable and reasonably estimable are accrued at expected rates based on total estimated crop year performance. Rebates that are not probable or estimable are accrued when certain milestones are
achieved. Rebates not covered by binding agreements or published vendor programs are accrued when conclusive documentation of right of receipt is obtained. By the fiscal year end, we have received substantially all of the rebates due us for the
prior crop year, and rebate income is adjusted accordingly.

We accrue rebates as part of our cost of sales, primarily for chemical and seed products. As
of May 28, 2006, rebates receivable are for the current crop year, which began as early as September 2005 and may end as late as January 2007, depending on the supplier. Rebates



8



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##### Table of Contents

based on the amount of materials purchased are offset in cost of goods sold as inventory is sold. Rebates that are based on the amount of sales volume are
offset to cost of goods sold when we estimate they have been earned based on our experience with the supplier and our anticipated sales volume of their products.

Due to the diverse nature of rebate programs, estimates of rebates earned can vary significantly from period to period and when comparing interim periods of the current and prior year, and more likely than not will trail sales. Due to
changes in vendor rebate programs, our enhanced rebate tracking ability, and operating performance factors, the Company accrued more rebate earnings in the first quarter of fiscal 2007 as compared to the same period of fiscal 2006.

Accounting for Stock Based Compensation.On February 27, 2006, the Company adopted SFAS 123(R), Share Based Payments (SFAS 123(R)) which
requires the measurement and recognition of compensation cost for all share-based payment awards made to employees and directors, including grants of employee stock options related to the 2003 Plan, based on the grant date estimated fair value of
each award, net of estimated cancellations, over the employees requisite service period. Prior to the adoption of SFAS 123(R), the Company accounted for share-based awards to employees and directors using the intrinsic value method in
accordance with APB 25, Accounting for Stock Issued to Employees (APB 25) as allowed under SFAS 123, Accounting for Stock Based Compensation (SFAS 123). Under the intrinsic value method, no share based compensation cost
related to stock options had to be recognized in the Companys earnings because the exercise price was at least equal to the market value of the common stock on the grant date. Because most of the Companys stock option grants were vested
prior to February 27, 2006, and because the value used to measure compensation expense for restricted shares is the same for APB 25, SFAS 123, and SFAS 123 (R), the adoption of SFAS 123(R) had less than a $20 thousand impact on the
Companys operating income, pretax income, or net income and did not affect the reported amount of basic and fully diluted earnings per share for the thirteen weeks ended May 28, 2006.

The Company elected to use the modified prospective transition method upon adoption of SFAS 123(R), which requires the application of the accounting standard as of
February 27, 2006, the first day of the Companys fiscal year 2007. In accordance with this transition method, the Companys condensed consolidated financial statements for prior periods have not been restated to reflect, and do not
include, the impact of SFAS 123(R).

Under SFAS 123(R), for share-based payment awards granted subsequent to February 27, 2006, the fair value of
awards that are expected to ultimately vest is recognized as expense over the requisite service periods. SFAS 123(R) requires forfeitures to be estimated at the time of grant in order to estimate the amount of share-based payment awards that will
ultimately vest. Forfeiture rates are based on historical rates. The estimated forfeiture rate will be adjusted if actual forfeitures differ from original estimates. The effect of any change in estimated forfeitures will be recognized through a
cumulative catch-up adjustment that will be included in compensation cost in the period of the change in estimate. For share-based payment awards granted prior to February 27, 2006, the Company will recognize the remaining unvested SFAS 123 pro
forma expense according to the remaining vesting conditions.

Total share-based compensation cost recognized under SFAS 123(R) for the thirteen weeks ended
May 28, 2006, which is included in selling, general and administrative expenses, was $1.0 million and consists of charges associated with restricted stock units and employee stock options. The share based compensation income tax benefit
recognized on this expense was $0.4 million. The share-based compensation excess income tax benefit recorded for the same period and recognized as a source of cash provided by financing activities in the condensed consolidated statement of cash
flows was $1.6 million.

Prior to the adoption of SFAS 123(R), the Company presented tax benefits of deductions resulting from stock compensation as cash
flows from operating activities in its statements of cash flows. SFAS 123(R) requires the cash flows from the excess tax benefits the company realizes on stock compensation to be presented as cash flows from financing activities. The tax benefit
exceeds compensation expense due to tax benefits received from the issue of common stock from the rabbi trust (see Deferred Compensation in Note 6.)

Earnings per Share.Earnings per share are based on the weighted average number of shares of common stock outstanding during the period. The basic and diluted weighted average share calculation for the
thirteen weeks ended May 28, 2006, and May 29, 2005, are presented in the following table.



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Earnings per share



|                                                                                               |  |                      |            |              |   |           
|---------------------------------------------------------------------------------------------- |  | -------------------- | ---------- | ------------ | - | ----------
|                                                                                               |  | Thirteen Weeks Ended
|                                                                                               |  | May 28, 2006         |            | May 29, 2005
|Net income (in thousands)                                                                      |  | $                    | $58,316    |              | $ | 49,387    
|                                                                                               |  |                      |            |              |   |           
|Weighted average shares of common stock outstanding used in computing basic earnings per share |  |                      | 50,851,510 |              |   | 50,432,696
|Net effect of dilutive stock options and restricted stock units                                |  |                      | 1,518,668  |              |   | 1,828,805 
|                                                                                               |  |                      |            |              |   |           
|Weighted average shares of common stock used in computing diluted earnings per share           |  |                      | 52,370,178 |              |   | 52,261,501
|                                                                                               |  |                      |            |              |   |           
|Basic earnings per share                                                                       |  | $                    | 1.15       |              | $ | 0.98      
|                                                                                               |  |                      |            |              |   |           
|Diluted earnings per share                                                                     |  | $                    | 1.11       |              | $ | 0.94      
|                                                                                               |  |                      |            |              |   |           

Reclassifications.Certain prior year amounts in the condensed consolidated financial statements
have been reclassified to conform to the current year presentation. These reclassifications had no net impact on previously reported results of operations.

2. Acquisitions and Divestitures

In March 2006, we acquired the remaining 50% interest of our joint venture with UAP Timberland, LLC
(Timberland) for consideration of approximately $13 million. Prior to the acquisition, Timberland was accounted for as an unconsolidated affiliate using the equity method of accounting under which UAPs proportionate share of net
income before taxes was included in Royalties, service charges and other income and expenses in the statements of earnings. With the acquisition, Timberland became a wholly-owned subsidiary and is now accounted for on a consolidated
basis. This change contributed additional sales of approximately $27 million during the thirteen weeks ended May 28, 2006, when compared with the fiscal first quarter of 2006.

On February 28, 2006, we sold a portion of our retail locations in western Canada for total consideration of approximately $9 million. Related assets were classified as held for sale in the February 26, 2006
balance sheet. We will continue to supply the purchaser with agricultural inputs per a supply agreement negotiated as part of the sales contract. The impact to fiscal year 2007 is not expected to be material.

3. Royalties, Service Charges and Other Income and Expenses

Royalties, service charges and other income and expenses, consist of the following:



|                                                         |  |                        |        |   |              |   |        |  
|-------------------------------------------------------- |  | ---------------------- | ------ | - | ------------ | - | ------ | -
|                                                         |  | Thirteen Weeks Ended   |       
|Royalties, service charges and other income and expenses |  | May 28, 2006           |        |   | May 29, 2005 |  
|                                                         |  | (dollars in thousands) |       
|Royalty (income)                                         |  | $                      | (3,210 | ) |              | $ | (4,625 | )
|Service charge (income)                                  |  |                        | (1,842 | ) |              |   | (1,396 | )
|Other (income)                                           |  |                        | (2,154 | ) |              |   | (1,740 | )
|                                                         |  |                        |        |   |              |   |        |  
|Total                                                    |  | $                      | (7,206 | ) |              | $ | (7,761 | )
|                                                         |  |                        |        |   |              |   |        |  

4. Certain Asset Accounts

Receivables and Allowance for Doubtful Accounts.Our receivables include receivables from customers net of allowances for doubtful accounts, vendor rebates receivable, and miscellaneous receivables. As
of May 28, 2006, February 26, 2006, and May 29, 2005, the net receivables from customers were $955.4 million, $228.4 million, and $872.2 million, respectively, vendor rebates receivable were $158.4 million, $44.2 million, and $121.8
million, respectively, and miscellaneous receivables were $17.7 million, $16.3 million, and $15.1 million, respectively. Net receivables from customers include receivables from unconsolidated affiliates in the amounts of $0.0



10



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##### Table of Contents

million, $1.1 million, and $3.4 million as of May 28, 2006, February 26, 2006, and May 29, 2005, respectively. At May 28,
2006, February 26, 2006, and May 29, 2005, the allowance for doubtful accounts totaled $14.6 million, $12.8 million, and $15.5 million respectively.

Inventory. Inventory consists primarily of chemicals, fertilizer, and seed products purchased from our suppliers for resale to our customers. We record inventory at the lower of cost or market.

Our reserves for slow-moving and obsolete inventory items were $5.7 million, $5.4 million and $6.4 million, as of May 28, 2006, February 26, 2006, and
May 29, 2005, respectively.

Inventories are comprised of the following:



|                                  |  |                        |         |                   |   |              |  |   |        
|--------------------------------- |  | ---------------------- | ------- | ----------------- | - | ------------ |  | - | -------
|Inventories                       |  | May 28, 2006           |         | February 26, 2006 |   | May 29, 2005
|                                  |  | (dollars in thousands)
|Raw materials and work in process |  | $                      | 11,768  |                   | $ | 15,986       |  | $ | 9,697  
|Finished goods                    |  |                        | 702,447 |                   |   | 714,785      |  |   | 672,216
|                                  |  |                        |         |                   |   |              |  |   |        
|Total                             |  | $                      | 714,215 |                   | $ | 730,771      |  | $ | 681,913
|                                  |  |                        |         |                   |   |              |  |   |        

Goodwill.Goodwill represents the excess of the purchase price paid (including the cost of
acquisition) over the fair value of the net assets acquired in connection with the business acquisitions. At May 28, 2006, February 26, 2006, and May 29, 2005, goodwill totaled $35.6 million, $27.2 million and $34.6 million,
respectively. The $8.4 million increase during the first fiscal quarter of 2007 is related to the acquisition of Timberland (see Acquisitions and Divestments in Note 2). During 2006, we reduced goodwill $7.4 million to reflect the
reduction of the deferred tax liability established in the initial acquisition purchase price allocation based on further refinement of our best estimate of the tax basis of various assets and liabilities.

Debt Issuance Costs. Our debt issuance costs net of amortization were $16.0 million, $17.2 million, and $20.2 million at May 28, 2006, February
26, 2006, and May 29, 2005, respectively. Our debt issuance costs consisted of costs associated with United Agri Products revolving credit facility, United Agri Products 81/4% Senior Notes
due 2011 (the 81/4% Senior Notes), and our 103/4% Senior Discount Notes due 2012 (the 103/4% Senior
Discount Notes). (Our 8 1/4% Senior Notes and 10 3/4% Senior Discount Notes together are referred to as senior notes.) Deferred financing costs are being amortized on a straight-line basis over the terms of the debt, which
approximates the effective interest method, to which the costs relate, and the related amortization is recorded to interest expense and other amortization expenses. In conjunction with the June 2006 refinancing of the credit facility and the tender
of senior notes, $16.0 million of these costs will be written-off and expensed during our second fiscal quarter. (See Subsequent Events in Note 14)

5. Costs Associated with Exit or Disposal Activities

During fiscal
year 2006, we consolidated ten regional distribution centers into five, closed one regional finance center, and centralized and consolidated various administrative functions. We also consolidated two regional sales offices and two formulating plants
during fiscal 2005.

The restructuring activities which began in fiscal year 2005 were completed during the first quarter of fiscal 2007. We have incurred
$1.3 million of the estimated $1.6 million of costs for the restructuring activities which began in fiscal year 2006.

6. Share-based Compensation

Stock Compensation Plans.UAPs share-based compensation programs include non-qualified stock options, restricted stock units, and
deferred compensation. At May 28, 2006, our stock compensation programs were in accordance with the six equity compensation plans maintained by the company: the 2004 Long-Term Incentive Plan (the 2004 Plan), the 2003 Stock Option
Plan (the 2003 Plan), the 2004 Non-Executive Director Stock Option Plan (the Director Option Plan), the 2003 Deferred Compensation Plan (the 2003 DCP), the 2004 Deferred Compensation Plan (the 2004
DCP), and the Director Deferred Compensation Plan (the Director DCP).

Stock Options.Our stock option plans provide
non-qualified stock options to purchase authorized but unissued shares of common stock at an exercise price, term, and other terms and conditions as determined by our board of directors (or compensation committee) at the time of grant of the
options. To date, the exercise price of each stock option has equaled the market price of UAPs stock on the date of the grant.

Most options are
scheduled to vest over five years and current outstanding options are scheduled to vest within the next three years.

The fair value of each option grant
is estimated on the date of the grant using the Black-Scholes option pricing model.



11



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##### Table of Contents

The weighted average assumptions used in the model are outlined in the following table:



|                                       |  |            |      |   |               |   |      |  
|-------------------------------------- |  | ---------- | ---- | - | ------------- | - | ---- | -
|Date of Grant                          |  | April 2004 |      |   | November 2003 |  
|Expected Volatility                    |  |            | 0.00 | % |               |   | 0.00 | %
|Expected life (years)                  |  |            | 5.00 |   |               |   | 5.00 |  
|Risk-free interest rate                |  |            | 3.39 | % |               |   | 3.28 | %
|Dividend yield                         |  |            | 0.00 | % |               |   | 0.00 | %
|Weighted average fair value of options |  | $          | 0.39 |   |               | $ | 0.38 |  

Had compensation expense been recognized for stock-based compensation plans in accordance with provisions
of SFAS 123, as amended, in the first quarter of fiscal year 2006, the Company would have recorded net income and earnings per share as follows (in thousands, except per share data):



|                                                                                                                              |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------------- |  | - | ------ | -
|Net income as reported                                                                                                        |  | $ | 49,387 |  
|Add: Stock-based employee compensation included in reported net income, net of tax (represents restricted stock expense)      |  |   | 173    |  
|Less: Total stock-based employee compensation expense determined under the fair-value-based method for all awards, net of tax |  |   | (185   | )
|                                                                                                                              |  |   |        |  
|Pro forma net income                                                                                                          |  | $ | 49,375 |  
|                                                                                                                              |  |   |        |  
|Basic earnings per share:                                                                                                     |  |   |        |  
|As reported                                                                                                                   |  | $ | 0.98   |  
|Pro forma                                                                                                                     |  | $ | 0.98   |  
|Diluted earnings per share:                                                                                                   |  |   |        |  
|As reported                                                                                                                   |  | $ | 0.94   |  
|Pro forma                                                                                                                     |  | $ | 0.94   |  

The following table summarizes information concerning options outstanding, including the related transactions
under the option plans, for the thirteen weeks ended May 29, 2005, and May 28, 2006:



|                                                                       |  |                         |   |  |                                          |     
|---------------------------------------------------------------------- |  | ----------------------- | - |  | ---------------------------------------- | ----
|Stock options                                                          |  | Shares subjectto option |   |  | Weighted-average exerciseprice per share
|Balance at February 27, 2005 (2,531,000 shares vested and exercisable) |  | 3,359,535               |   |  | $                                        | 2.56
|Granted                                                                |  |                        |   |  | $                                        |    
|Exercised                                                              |  |                        |   |  | $                                        |    
|Forfeited / lapsed                                                     |  |                        |   |  | $                                        |    
|                                                                       |  |                         |   |  |                                          |     
|Balance at May 29, 2005 (2,541,827 shares vested and exercisable)      |  | 3,359,535               |   |  | $                                        | 2.56
|                                                                       |  |                         |   |  |                                          |     
|Balance at February 26, 2006 (2,321,756 shares vested and exercisable) |  | 2,841,272               |   |  | $                                        | 2.56
|Granted                                                                |  |                        |   |  | $                                        |    
|Exercised                                                              |  | (117,254                | ) |  | $                                        | 2.56
|Forfeited / lapsed                                                     |  |                        |   |  | $                                        |    
|                                                                       |  |                         |   |  |                                          |     
|Balance at May 28, 2006 (2,214,391 shares vested and exercisable)      |  | 2,724,018               |   |  | $                                        | 2.56
|                                                                       |  |                         |   |  |                                          |     

As of May 28, 2006, the aggregate intrinsic value (market value of the stock less option exercise price),
which is the total pretax intrinsic value that would have been received by the option holders had all option holders exercised their options as of that date, is $55.3 million and is based on the Companys average stock price on May 28,
2006. The total number of options exercisable (all of which were in-the-money) on May 28, 2006, was 2.2 million. The weighted average remaining contractual life was 5.5 years on May 28, 2006, for both outstanding and exercisable options.

Restricted Stock Units. Restricted stock units (RSUs) were granted to eligible employees and management pursuant to our 2004
Plan and are converted into shares of UAP common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to employees continuing service to UAP. The compensation expense related to these awards is determined using the
value of UAPs common stock on the date of the grant, and; compensation is recognized over the requisite service period on a straight-line basis and is adjusted for actual forfeitures before vesting. Restricted stock units generally vest over
three or four years.



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##### Table of Contents

The following is a summary of unvested RSU activity for the thirteen weeks ended May 28, 2006:



|                                |  |                        |   |  |                            |      
|------------------------------- |  | ---------------------- | - |  | -------------------------- | -----
|                                |  | Restricted Stock Units |   |  | Weighted-Average FairValue
|Balance at February 26, 2006    |  | 224,050                |   |  | $                          | 15.94
|Granted                         |  | 510,500                |   |  | $                          | 21.13
|Vested                          |  | (56,074                | ) |  | $                          | 15.94
|Cancelled                       |  | (2,150                 | ) |  | $                          | 18.48
|                                |  |                        |   |  |                            |      
|Non-vested RSUs at May 28, 2006 |  | 676,326                |   |  | $                          | 19.85
|                                |  |                        |   |  |                            |      

As of May 28, 2006, there was approximately $12.0 million of unrecognized compensation expense, before taxes
and net of estimated forfeitures, related to RSU grants, which will be recognized over a weighted average period of 3.3 years. Compensation cost related to RSUs was $1.0 million and $0.2 million for the thirteen weeks ended May 28, 2006 and
May 29, 2005 respectively.

Deferred Compensation.We maintain two deferred compensation plans for the benefit of certain members of
management, the 2003 DCP, which provides for the crediting of deferred shares for each executive who entered into a retention agreement at the time of UAPs acquisition of certain of Con Agra Foods Agricultural Products Businesses, and
the 2004 DCP, which provides for the crediting of deferred shares for each member of management who waived the right to receive a portion of their cash bonus for the 2004 fiscal year. The company established a trust (the rabbi trust) to
hold the assets of the 2003 DCP and the 2004 DCP. The assets of the rabbi trust are subject to the claims of the companys creditors in the event of the companys insolvency.

As of May 28, 2006, there were 773,044 shares of our common stock remaining in the rabbi trust. The shares of common stock held by the rabbi trust are issued and outstanding, and therefore participate in
dividends and are included in the calculation of the weighted average share computation. The Company receives an income tax benefit at the time the common stock is transferred from the trust to the recipient.

7. Income Taxes

The following table summarizes the factors causing
income taxes to differ from U.S. federal statutory rate:



|                                                                        |  |                        |        |   |              |   |        |  
|----------------------------------------------------------------------- |  | ---------------------- | ------ | - | ------------ | - | ------ | -
|                                                                        |  | Thirteen Weeks Ended   |       
|Factors causing income taxes to differ from U.S. federal statutory rate |  | May 28, 2006           |        |   | May 29, 2005 |  
|                                                                        |  | (dollars in thousands) |       
|U.S. tax at federal statutory rate                                      |  | $                      | 33,339 |   |              | $ | 28,657 |  
|Dividends on shares of stock held in rabbi trust                        |  |                        | (51    | ) |              |   | (82    | )
|State income taxes                                                      |  |                        | 3,434  |   |              |   | 3,622  |  
|Foreign credits and other                                               |  |                        | 214    |   |              |   | 294    |  
|                                                                        |  |                        |        |   |              |   |        |  
|Total                                                                   |  | $                      | 36,936 |   |              | $ | 32,491 |  
|                                                                        |  |                        |        |   |              |   |        |  

We currently estimate that there will be a foreign tax credit carryover of approximately $0.8 million, which will
begin to expire in fiscal year 2015. We have posted no valuation allowance against the deferred tax asset for this credit carryover because, based on current projections and tax planning options, we believe it is more likely than not we will utilize
these credits before they expire.



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##### Table of Contents

8. Debt

Total
current and long-term debt as of May 28, 2006, February 26, 2006, and May 29, 2005, consisted of the following:



|                                                             |  |                        |         |                   |   |              |  |   |        
|------------------------------------------------------------ |  | ---------------------- | ------- | ----------------- | - | ------------ |  | - | -------
|Debt                                                         |  | May 28, 2006           |         | February 26, 2006 |   | May 29, 2005
|                                                             |  | (dollars in thousands)
|Total debt                                                   |  |                        |         |                   |   |              |  |   |        
|81/4% Senior notes                                           |  | $                      | 203,500 |                   | $ | 203,500      |  | $ | 203,500
|103/4% Senior discount notes, at accreted value              |  |                        | 105,631 |                   |   | 102,839      |  |   | 94,956 
|                                                             |  |                        |         |                   |   |              |  |   |        
|Total debt                                                   |  |                        | 309,131 |                   |   | 306,339      |  |   | 298,456
|Less: current portion                                        |  |                        |         |                   |   |              |  |   |        
|Senior notes to be refinanced with revolving credit facility |  |                        | 133,784 |                   |   |             |  |   |       
|                                                             |  |                        |         |                   |   |              |  |   |        
|Total long-term debt                                         |  | $                      | 175,347 |                   | $ | 306,339      |  | $ | 298,456
|                                                             |  |                        |         |                   |   |              |  |   |        

On June 1, 2006, substantially all of the above debt was extinguished and replaced. (See Subsequent
Events Note 14.)

As of May 28, 2006, management believes approximately $60.9 million of permitted distributions were available to pay dividends
under our restricted payment covenant in our indenture governing the 103/4% Senior Discount Notes before giving effect to the June 1, 2006 dividend payment of $9.5 million. Under the new credit facility entered into on
June 1, 2006, management believes that the permitted distributions available to pay dividends under the new restricted payment covenant would be approximately $75.0 million before giving effect to the June 1, 2006 dividend payment of $9.5
million.

9. Commitments and Contingencies

We
are a party to a number of lawsuits and claims arising out of the operation of our businesses. After taking into account liabilities recorded, management believes the ultimate resolution of such matters should not have a material adverse effect on
our financial condition, results of operations, or liquidity.

10. Employee Benefit Plans

Management Incentive Program.We have a management incentive plan for key officers and employees, based on growth, profitability, individual performance of
each operating center, and key performance metrics. Amounts charged to expense totaled $16.9 million for the thirteen weeks ended May 28, 2006, and $19.1 million for the thirteen weeks ended May 29, 2005.

11. Dividends

Dividends Declared and Paid.On
April 4, 2006, our board of directors declared a quarterly dividend on our common stock in the amount of $0.1875 per share, which equals total quarterly dividend payments of $9.5 million. The record date for the dividend payment was
May 15, 2006, and the payment date was June 1, 2006.

12. Business Segment and Related Information

The company has one reporting segment engaged in the sale of agricultural inputs to growers and regional dealers.

Net sales and long-lived assets by geographical area are as follows:



|              |  |                        |           |              |   |          
|------------- |  | ---------------------- | --------- | ------------ | - | ---------
|              |  | Thirteen Weeks Ended  
|Net sales     |  | May 28, 2006           |           | May 29, 2005
|              |  | (dollars in thousands)
|United States |  | $                      | 1,371,383 |              | $ | 1,322,500
|Canada        |  |                        | 26,640    |              |   | 34,410   
|              |  |                        |           |              |   |          
|Total         |  | $                      | 1,398,023 |              | $ | 1,356,910
|              |  |                        |           |              |   |          



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##### Table of Contents

|                  |  |                        |         |                   |   |              |  |   |        
|----------------- |  | ---------------------- | ------- | ----------------- | - | ------------ |  | - | -------
|Long-lived assets |  | May 28, 2006           |         | February 26, 2006 |   | May 29, 2005
|                  |  | (dollars in thousands)
|United States     |  | $                      | 180,061 |                   | $ | 175,380      |  | $ | 177,791
|Canada            |  |                        | 562     |                   |   | 580          |  |   | 3,827  
|                  |  |                        |         |                   |   |              |  |   |        
|Total             |  | $                      | 180,623 |                   | $ | 175,960      |  | $ | 181,618
|                  |  |                        |         |                   |   |              |  |   |        

Long-lived assets consist of property, plant and equipment, net of depreciation, goodwill, indefinite life and
amortizable intangibles, and other assets. Long-lived assets by geographical area are based on location of facilities.

Net sales by product category are
as follows:



|                              |  |                        |           |              |   |          
|----------------------------- |  | ---------------------- | --------- | ------------ | - | ---------
|                              |  | Thirteen Weeks Ended  
|Net sales by product category |  | May 28, 2006           |           | May 29, 2005
|                              |  | (dollars in thousands)
|Chemicals                     |  | $                      | 713,949   |              | $ | 723,540  
|Fertilizer                    |  |                        | 334,330   |              |   | 336,427  
|Seed                          |  |                        | 321,615   |              |   | 276,298  
|Other                         |  |                        | 28,129    |              |   | 20,645   
|                              |  |                        |           |              |   |          
|Total                         |  | $                      | 1,398,023 |              | $ | 1,356,910
|                              |  |                        |           |              |   |          

13. Related Party Transactions

On March 9, 2006, certain funds affiliated with Apollo Management V, L.P., a major stockholder of the Company, and current and former employees, including certain members of our management sold 9,322,858 of the
Companys common shares in a secondary offering pursuant to an existing registration statement. The sale, from which the Company received no proceeds, represented approximately 18.5% of the current shares outstanding. Following this sale,
Apollo beneficially owned approximately 17% of our outstanding common stock. Our management teams beneficial ownership of the Company, including vested options, decreased to approximately 6%.

14. Subsequent Events

Debt Refinancings and Early
Extinguishments. On June 1, 2006, our wholly owned subsidiary, United Agri Products, Inc. refinanced its existing revolving credit facility and entered into a new senior secured credit facility. The new credit facility provides for a
new six-year $175 million term loan facility and a five-year senior secured asset based revolving credit facility in an aggregate principal amount of $675 million, including $50 million for letters of credit. Availability of the revolving credit
facility is subject to a borrowing base formula, which includes availability of an over-advance during certain periods. The new credit facility provides that interest rates are based on, at United Agri Products, Inc.s option, (a) LIBOR
plus the applicable margin or (b) the base rate, which will be the higher of (i) the rate publicly quoted by the Wall Street Journal as the base rate on corporate loans posted by at least 75% of the nations 30 largest
banks and (ii) the Federal Funds rate plus 0.50%, plus applicable margin.

The applicable margin for the term facility is 2.00% for LIBOR
advances and 0.75% for base rate advances. The applicable margin for the revolving facility is 1.25% for LIBOR advances and 0.00% for base rate advances. The revolving facility is secured by a first-priority lien on all accounts, inventory, general
intangibles related to accounts and inventory, and all proceeds of the foregoing (Current Asset Collateral) of UAP Holdings and its subsidiaries, and a second priority lien (subject to certain exclusions and exceptions) on other assets
and proceeds of such other assets. The term facility is secured by a first-priority lien (subject to certain exclusions and exceptions) in all assets of UAP Holdings and its subsidiaries, and all proceeds thereof other than the Current Asset
Collateral, and a second-priority lien in the Current Asset Collateral.

Additionally, on June 1, 2006, UAP Holding Corp. and United Agri Products,
Inc. completed tender offers and consent solicitations for the 10 3/4% Senior Discount Notes due 2012
issued by UAP Holding Corp. and the 8 1/4% Senior Notes due 2011 issued by United Agri Products, Inc. The
companies accepted for purchase $123.1 million principal amount at maturity of the 10 3/4% Senior Discount
Notes (representing approximately 98.4% of the previously outstanding 10 3/4% Senior Discount Notes) and
$203.5 million principal amount of the 8 1/4% Senior Notes representing approximately 99.9% of the
previously outstanding 8 1/4% Senior Notes. Total consideration paid for the notes tendered plus accrued
interest thereon was $118.8 million for the 10 3/4% Senior Discount Notes and $227.2 million for the
8 1/4% Senior Notes. These payments and related expenses were financed through borrowings under the new
credit facility.



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In connection with the refinancing and early extinguishment of the senior notes, the Company expects to record a pretax
charge of approximately $47 million during the second quarter. This loss includes approximately $31 million for tender premiums and related transaction costs to acquire the debt and $16 million for the write-off of unamortized debt issue costs.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------

Unless the context requires otherwise, all references to Company, we, us, ours, and UAP refer specifically to UAP Holding Corp. and its consolidated
subsidiaries. Additionally, all references to UAP Holding Corp. refer specifically only to UAP Holding Corp., excluding its subsidiaries, and all references to United Agri Products refer specifically only to United Agri
Products, Inc., and its subsidiaries, and all references to United Agri Products, Inc. refer specifically to United Agri Products, Inc., excluding its subsidiaries.

We intend for this Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) to provide the reader with information that will assist in understanding UAP, our
consolidated financial condition, liquidity and capital resources, and results of operations for the periods presented. You should read this MD&A in conjunction with our condensed consolidated financial statements and the accompanying notes
thereto appearing elsewhere in this Report. The results of operations for the thirteen weeks ended May 28, 2006, are not necessarily indicative of the results to be expected for other interim periods or for the full fiscal year. This section
should also be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended February 26, 2006.

In addition, the
statements in the discussion and analysis regarding industry outlook, our expectations regarding the performance of our business, our liquidity and capital resources, and the other non-historical statements in the discussion and analysis are
forward-looking statements. See Forward Looking Statements.

Our Business

We are the largest independent distributor of agricultural inputs and professional non-crop products in the United States and Canada. We strive to be the distributor of
choice in our industry and earn the trust of our customers and suppliers by providing high quality products at competitive prices, supported by consistent and reliable service, and expertise. Our customers include farmers, commercial growers,
regional dealers, and consumers in the professional non-crop market. Over 90,000 customers purchased products or services from us during fiscal 2006.

We
market a comprehensive line of products, including chemicals, fertilizer, and seed manufactured by the worlds leading agricultural input companies, including BASF, Bayer, ConAgra International Fertilizer Company, Dow, DuPont, Monsanto, and
Syngenta. In addition to our product offering, we provide a broad array of value-added services including crop management, biotechnology advisory services, custom blending, inventory management, and custom applications of crop inputs. The products
and services we offer are critical to our customers because they lower the overall cost of crop production and improve crop quality and yield.

In addition
to the products we purchase from our suppliers for resale, we also source, formulate, package, market, and distribute over 220 brands of proprietary and private label products. These products typically allow us to obtain a higher gross margin than
we obtain from the other branded products we distribute.

Our operations entail a network of approximately 340 sales and distribution facilities and three
formulation plants strategically located in major crop-producing areas of the United States and Canada. Our integrated distribution network enables our approximately 1,100 salespeople to provide our customers with a broad range of products and
reliable service. As a result of our broad scale, we provide leading agricultural and professional product input companies with an efficient means to access a highly fragmented customer base of farmers, growers, and professional non-crop consumers.

Our and our customers businesses are highly seasonal, based upon the planting, growing, and harvesting cycles. During the last three fiscal years,
greater than 75% of our net sales occurred during the first and second fiscal quarters of each year because of the condensed nature of the planting season. As a result of the seasonality of sales, we experience significant fluctuations in our
revenues, net income, and net working capital levels throughout our fiscal year.

The Agricultural Inputs Distribution Industry

We operate in the highly competitive agricultural inputs distribution industry. Our industry depends on farm expenditures for crop inputs, which in turn is dependent upon
planted acreage in the United States and Canada. Over the last fifteen years, agricultural input expenses in the United States grew at a compound annual growth rate of 3.3%, based on historical data obtained from the Economic Research Service of the
USDA. Planted acreage has been relatively flat over the last fifteen years, leading to a relatively stable but very competitive industry for crop inputs.



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The key drivers of our industry include continued world population growth; the use of more effective chemicals and
fertilizer; stable planted acreage; the trend towards larger and more efficient farms; the increased production of renewable fuels from corn, soybeans, and other crops; and the increased use of biotechnology in the production of seed. The three
primary product areas of the agricultural input and professional non-crop markets are chemicals, fertilizer, and seed.

Our principal competitors in the
distribution of crop production inputs include agricultural cooperatives, national and international fertilizer producers, major grain companies, independent distributors, and brokers. We, along with other agricultural input distributors, represent
the main route-to-market for agricultural and professional non-crop input manufacturers and fill a critical need in the U.S. and Canadian agricultural and professional non-crop input markets by allowing suppliers to economically access a highly
fragmented customer base of growers, dealers, and professional non-crop customers. In each of our local markets, we typically compete with two or more distributors on the basis of breadth of product offering, the ability to provide one-stop
shopping with customized local products and services, our sales-forces knowledge of and relationships with our customers, and price. Additionally, we compete with our industry peers for talented employees in the areas of sales and
operations.

Our industry in general is affected by a number of factors including, but not limited to, cost to distribute products, customer financial
condition, local and national laws and regulations, economic conditions, employment, inflation, political climate, interest rates, fuel prices, and weather patterns.

Our opportunities within the industry include the use of our national distribution network to further participate in the growing fertilizer and seed markets as we extend those product offerings to existing customers,
continue expanding our proprietary and private label lines of chemicals and seed, grow market share where gaps exist through sales-force penetration, adding or acquiring locations, and gaining additional efficiencies in working capital and expenses.

Strategic Initiatives

We will continue to seek to
grow our business, improve profitability, and improve working capital through the following principal strategies:



| |  |  | Expanding our distribution network and leveraging our scale;
| | - |  | ------------------------------------------------------------



| |  |  | Growing our presence in fertilizer, seed, and our proprietary and private label products; and
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Targeting continued profitability enhancement through working capital and expense management.
| | - |  | ---------------------------------------------------------------------------------------------

Building upon our Distribution NetworkOne of our key initiatives is to grow our business by leveraging our size and leading market share across North America. We study our market share by state,
county, and customer, and develop sales initiatives at local and regional levels to address any gaps and opportunities we have in our distribution network for chemicals, fertilizer, and seed. Where our data indicates an opportunity, we have the
potential to add sales personnel and/or locations and assets to fill in gaps in our coverage.



| |  |  | During the first fiscal quarter of 2007, we purchased the remaining 50% share of our joint venture in UAP Timberland and we acquired a location from an independent retail
distributor. We will continue to analyze and pursue additional acquisition candidates as appropriate opportunities arise in line with our strategy.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fertilizer and Seed GrowthWe believe there are continued growth opportunities going forward in both fertilizer and seed. As seed varieties continue to be enhanced through biotechnology, we believe they will serve as a
growth platform due to the increased value-added nature of their sale to the customer. We intend to leverage our growth in the seed business through advanced technical training of our sales-force, hiring and strategically placing experienced
salespeople, using incentive compensation plans incorporating seed-specific performance goals, nurturing our relationships with our seed suppliers, and targeting new retail and wholesale opportunities to enhance our sales presence in regions where
gaps exist. We will also leverage our growth in the fertilizer business by nurturing relationships with fertilizer suppliers and by making modest investments in storage and blending facilities in regions where gaps exist.

Proprietary and Private Label BusinessOur proprietary and private label products typically offer higher gross margins than the supplier branded
products we sell. We currently market over 220 proprietary branded products and have a broad proprietary product offering in each of our core product areas, including professional non-crop. We continue to work with nearly all of our key suppliers on
additional private label opportunities.

Working Capital and Expense ManagementWe believe we are well positioned to continue to improve
the financial performance of our business. We monitor performance regularly on key operating statistics such as inventory efficiency, credit, operating expenses, gross profit generation, and overall return on invested capital. This information will
continue to enable us to manage expenses and reduce average levels of working capital as a percent of net sales by concentrating on the following: earlier collection of supplier rebates, negotiating payable terms with key suppliers, continuing
inventory efficiencies through SKU reduction efforts and centralized purchasing, evaluating our suppliers on a total return basis including working capital management, continuing to focus on credit policies and procedures to maximize profitability,
and using competition and best practices among our operating divisions to drive overall focus on working capital and expense management that are tied to variable compensation plans.



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Factors Impacting Our Results for the First Quarter of Fiscal 2007

During the first quarter of fiscal 2007, several events took place that had or may have an impact on our business.

On March 3, 2006, we purchased the remaining 50% share of our joint venture in UAP Timberland. This purchase had no impact on our fiscal 2006 results of operations.
In conjunction with this first quarter of fiscal 2007 purchase, we began accounting for UAP Timberland on a consolidated basis. Our ownership interest was appropriately accounted for using the equity method prior to the quarter. The impact of the
acquisition to the first quarter of fiscal 2007 was an increase in our net sales, gross profit, selling, general and administrative expenses, and operating income of approximately $27.4 million, $4.3 million, $3.6 million, and $0.7 million,
respectively. In the first quarter of fiscal year 2006, $0.3 million of our income from the royalties, service charges and other income, net of expenses category was from the unconsolidated earnings of our affiliate UAP Timberland. See Note 2 in
Notes to Condensed Consolidated Financial Statements.

Over the last several quarters, we have enhanced our rebate tracking and forecasting systems and
methodology. Through these enhancements, we are able to accrue chemical and seed rebate income that is probable and reasonably estimable more closely with the sale of those rebate generating products than we have been able to in the past. The
improved timing of these rebate accruals, and changes in vendor rebate programs, allowed us to accelerate rebate income recognition by approximately $18.7 million in the first quarter of fiscal 2007, compared to the same period last year. See the
discussion in Critical Accounting Policies and Estimates on page 23 for further discussion of this item.

Recent Developments

On June 1, 2006, United Agri Products, Inc. replaced its existing revolving credit facility and entered into a new senior secured credit facility.
The new credit facility provides for a new six-year $175 million term loan facility and a five-year senior secured asset based revolving credit facility in an aggregate principal amount of $675 million, including $50 million for letters of credit.
Additionally, on June 1, 2006, UAP Holding Corp. and United Agri Products, Inc. completed tender offers and consent solicitations for the 10 3/4% Senior Discount Notes due 2012 issued by UAP Holding Corp. and the 8 1/4% Senior Notes due 2011 issued by United Agri Products, Inc. UAP Holding Corp. paid total consideration of $118.8 million for the $123.1 million principal amount at maturity of 10 3/4% Senior Discount Notes accepted for purchase and United Agri Products, Inc. paid total consideration of $227.2 million for the $203.5 million principal
amount of 8 1/4% Senior Notes accepted for purchase. Such payments were financed through borrowings under
the new credit facility. This refinancing is expected to result in an after-tax charge of approximately $29 million in the second quarter. See Note 14 in Notes to Condensed Consolidated Financial Statements for more details.



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RESULTS OF OPERATIONS

Analysis of Condensed Consolidated Statements of Earnings



|                                                            |  |                                               |           |   |              |   |           |               |  |       |   
|----------------------------------------------------------- |  | --------------------------------------------- | --------- | - | ------------ | - | --------- | ------------- |  | ----- | --
|                                                            |  | Thirteen Weeks Ended                          |           |   |              |  
|                                                            |  | May 28, 2006                                  |           |   | May 29, 2005 |   |           | PercentChange | 
|                                                            |  | (dollars in thousands, except per share data) |          
|Net sales                                                   |  | $                                             | 1,398,023 |   |              | $ | 1,356,910 |               |  | 3.0   | % 
|Cost of goods sold                                          |  |                                               | 1,212,374 |   |              |   | 1,187,739 |               |  | 2.1   | % 
|                                                            |  |                                               |           |   |              |   |           |               |  |       |   
|Gross profit                                                |  |                                               | 185,649   |   |              |   | 169,171   |               |  | 9.7   | % 
|Selling, general and administrative expenses                |  |                                               | 88,974    |   |              |   | 86,348    |               |  | 3.0   | % 
|Gain on sale of assets                                      |  |                                               | (250      | ) |              |   | (18       | )             |  | N/M   |   
|Restructuring costs                                         |  |                                               | 108       |   |              |   | 396       |               |  | (72.7 | %)
|Royalties, service charges, and other (income) and expenses |  |                                               | (7,206    | ) |              |   | (7,761    | )             |  | (7.2  | %)
|                                                            |  |                                               |           |   |              |   |           |               |  |       |   
|Operating income                                            |  |                                               | 104,023   |   |              |   | 90,206    |               |  | 15.3  | % 
|                                                            |  |                                               |           |   |              |   |           |               |  |       |   
|Interest expense                                            |  |                                               | 8,289     |   |              |   | 8,328     |               |  | (0.5  | %)
|Finance related and other charges                           |  |                                               | 482       |   |              |   |          |               |  | N/M   |   
|                                                            |  |                                               |           |   |              |   |           |               |  |       |   
|Income before income taxes                                  |  |                                               | 95,252    |   |              |   | 81,878    |               |  | 16.3  | % 
|Income tax expense                                          |  |                                               | 36,936    |   |              |   | 32,491    |               |  | 13.7  | % 
|                                                            |  |                                               |           |   |              |   |           |               |  |       |   
|Net income                                                  |  | $                                             | 58,316    |   |              | $ | 49,387    |               |  | 18.1  | % 
|                                                            |  |                                               |           |   |              |   |           |               |  |       |   
|Basic earnings per share                                    |  | $                                             | 1.15      |   |              | $ | .98       |               |  | 17.3  | % 
|Diluted earnings per share                                  |  | $                                             | 1.11      |   |              | $ | .94       |               |  | 18.1  | % 
|                                                            |  |                                               |          
|N/M = Not Meaningful                                        |  |                                               |           |   |              |   |           |               |  |       |   
|                                                            |  |                                               |          
|Effective tax rate                                          |  |                                               | 38.8      | % |              |   | 39.7      | %             |  |       |   
|Comparison as a percent of net sales:                       |  |                                               |           |   |              |   |           |               |  |       |   
|Gross profit                                                |  |                                               | 13.3      | % |              |   | 12.5      | %             |  |       |   
|Selling, general and administrative expenses                |  |                                               | 6.4       | % |              |   | 6.4       | %             |  |       |   
|Operating income                                            |  |                                               | 7.4       | % |              |   | 6.6       | %             |  |       |   
|Income before income taxes                                  |  |                                               | 6.8       | % |              |   | 6.0       | %             |  |       |   
|Net income                                                  |  |                                               | 4.2       | % |              |   | 3.6       | %             |  |       |   

Thirteen Weeks Ended May 28, 2006, Compared to Thirteen Weeks Ended May 29, 2005

Net Sales.Sales increased 3.0% to $1,398.0 million for the thirteen weeks ended May 28, 2006, compared to $1,356.9 million for the thirteen weeks
ended May 29, 2005.

Sales of chemicals decreased to $713.9 million in the thirteen weeks ended May 28, 2006, from $723.5 million in the thirteen
weeks ended May 29, 2005. Sales in fiscal 2007 related to the acquisition of UAP Timberland were $23.6 million. Decreased sales of fungicides, compared to last year, contributed to the shortfall as the demand for products that control Asian
Soybean Rust were not as strong as last year. Additionally, sales of pre-emergent herbicides decreased from last year, due to an increased adoption of Roundup Ready corn. This was partially offset by a corresponding increase in sales of glyphosate
products. Higher volumes of glyphosate herbicides more than offset lower end user unit prices. Additionally, increased sales of chemical seed treatments were partially offset by lower insecticide sales compared to last year.

Sales of fertilizer decreased slightly to $334.3 million in the thirteen weeks ended May 28, 2006, from $336.4 million in the thirteen weeks ended May 29,
2005. The reduction was due to a decrease in the volume sold that was partially offset by an increase in the per ton



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selling prices compared to last year. Fertilizer is typically applied either in the fall or spring seasons. Our third and fourth quarters of fiscal 2006
showed volume increases as fertilizer was applied in the fall and winter months, which therefore replaced tons available to be applied in our first quarter of fiscal 2007. Additionally, we believe higher prices caused some of our customers to reduce
fertilizer purchases compared to prior years.

Sales of seed increased to $321.6 million in the thirteen weeks ended May 28, 2006, from $276.3 million
in the thirteen weeks ended May 29, 2005. The increase was due to volume growth in both third party and proprietary brands of corn, cotton, and soybeans and higher prices due to increased sales of seeds which include a technology fee due to the
seeds enhanced traits.

Sales of proprietary chemical and seed products were 15.3% of total chemical and seed sales in the first quarter of fiscal
2007 compared to 14.5% in the same period last year.

Sales of other products increased to $28.2 million in the thirteen weeks ended May 28, 2006,
from $20.7 million in the thirteen weeks ended May 29, 2005, due to increased application fees, added contract service revenue from the UAP Timberland acquisition, and additional transportation and warehousing revenue from our Canadian
business.

Cost of Goods Sold.Cost of goods sold was $1,212.4 million in the thirteen weeks ended May 28, 2006, compared to $1,187.7
million in the thirteen weeks ended May 29, 2005. Gross profit (net sales less cost of goods sold) was $185.6 million in the thirteen weeks ended May 28, 2006, compared to $169.2 million in the thirteen weeks ended May 29, 2005. Gross
margin (gross profit as a percentage of net sales) was 13.3% in the thirteen weeks ended May 28, 2006, compared to 12.5% in the thirteen weeks ended May 29, 2005. The increase in gross profit dollars was due to primarily the timing of
third party rebate income. Due to changes in vendor rebate programs and enhanced rebate tracking ability, we accelerated the timing of our rebate income accrual in the fiscal first quarter of 2007 by an estimated amount of approximately $18.7
million compared to the same period last year. Last year, the majority of these rebates would have been recognized later in the fiscal year. Excluding rebate timing, gross profit was negatively affected by lower fertilizer sales volumes, partially
offset by gains from increased seed sales. Gross profit on chemicals was down slightly as decreases in fungicide and herbicide sales were almost offset by acquisitions.

Selling, General and Administrative Expenses.Selling, general and administrative (SG&A) expenses increased to $89.0 million in the thirteen weeks ended May 28, 2006, from $86.3
million in the thirteen weeks ended May 29, 2005. SG&A expenses were 6.4% of sales during both the thirteen weeks ended May 28, 2006, and May 29, 2005. The increase in expenses was due to the additional expenses brought on by our
acquisition of UAP Timberland and higher bad debt expense from fewer collections of accounts previously written off, partially offset by a refund of a past insurance premium. Additionally, fuel expenses increased compared to the prior year. We
experienced a 30.7% increase in combined gasoline and fuel expenses on slightly higher gallons used during the thirteen weeks ended May 28, 2006, resulting in a $1.6 million increase compared to last year.

Royalties, Service Charges, and Other Income net of Expenses.These items include royalty income generated by our proprietary products group, service
charge income paid by customers who do business with us on terms, and equity earnings in Timberland when it was an unconsolidated subsidiary in fiscal 2006, as well as other items. Other income decreased to $7.2 million in the thirteen weeks ended
May 28, 2006, from $7.8 million in the thirteen weeks ended May 29, 2005. We had no equity earnings from unconsolidated subsidiary in the first quarter of fiscal 2007 as we acquired the remaining 50% of our affiliate, UAP Timberland, early
in the first quarter compared to the first quarter of fiscal 2006. Increased customer service charge income during the thirteen weeks ended May 28, 2006, compared to the thirteen weeks ended May 29, 2005 was offset by lower royalty income
for the quarter. Royalty income was slightly lower than last year due to slower international and domestic sales of one of the products that make up our royalty stream.

Interest Expense.Interest expense was consistent at $8.3 million in the thirteen weeks ended May 28, 2006, compared to $8.3 million for the thirteen weeks ended May 29, 2005.

Finance Related and Other Charges.Finance related and other charges in the thirteen weeks ended May 28, 2006, were $0.5 million related to the
refinancing of our long-term debt, which was completed during the second quarter of fiscal 2007, and a secondary offering of our common stock consummated on March 9, 2006. We had no finance and related other charges during the first quarter of
fiscal 2006.

Income Taxes.The effective income tax rate was 38.8% for the thirteen weeks ended May 28, 2006, versus 39.7% for the
thirteen weeks ended May 29, 2005. The effective tax rate decrease in fiscal 2007 relates to the business reorganization announced during the third quarter of fiscal 2006.



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LIQUIDITY AND CAPITAL RESOURCES

Overview

Our principal liquidity requirements are for working capital, consisting primarily of receivables,
inventories, prepaid expenses, reduced by accounts payable and accrued expenses, capital expenditures, debt service, and dividends on our common stock. We will fund our liquidity needs, including dividend payments, with cash generated from
operations and, to the extent necessary, through borrowings under our new revolving credit facility. In addition, we expect to fund any growth capital expenditures with cash generated from operations, reductions in working capital, and incremental
debt.

We believe that our cash flows from operating activities and borrowing capabilities under our new revolving credit facility will be sufficient to
meet our liquidity requirements in the foreseeable future, including funding of capital expenditures, debt service payments, and our intended dividend payments on our common stock. If our cash flows from operating activities are insufficient to fund
dividend payments at intended levels, we will need to reduce or eliminate dividends or, to the extent we are permitted to do so under our debt agreements, fund dividends with borrowings or from other sources. If we use working capital or permanent
borrowings to fund dividends, we will have less cash available for future dividends and other purposes, which could negatively impact our financial condition, our results of operations and our ability to maintain or expand our business. If we are
unable to refinance our indebtedness prior to its stated maturity, we will be required to use cash to repay such indebtedness, and we may not have sufficient cash available to us at that time. Even if we have sufficient cash, such a repayment would
sufficiently decrease the amount of cash, if any, that is available to pay dividends.

Cash Flows

Cash flows used for operating activities totaled $41.9 million in the thirteen weeks ended May 28, 2006, compared to $52.0 million in the thirteen weeks ended
May 29, 2005. The improvement in net cash used in operating activities in the current period versus the prior period is due primarily to the improvement in net income of $8.9 million, an increase in accounts payable due to the Timberland
acquisition and working capital initiatives, and a faster use of prepayments made to chemical and seed suppliers. This was partially offset by higher trade receivables from increased sales and higher inventories, both related to our acquisition of
UAP Timberland. Additionally, inventory was partially higher due to higher fertilizer inventory levels resulting from increased fertilizer costs per ton.

Cash flows used for investing activities totaled $12.8 million for the thirteen weeks ended May 28, 2006, and $2.8 million for the thirteen weeks ended May 29, 2005. Additions to property, plant and equipment were $6.7 million in
the thirteen weeks ended May 28, 2006, compared to $3.2 million in the thirteen weeks ended May 29, 2005. Capital spending during the thirteen weeks ended May 28, 2006 was for a variety of projects: the largest two projects related to
the buy out of one of our leased locations and the acquisition of a distribution location. A majority of the additional spending related to expansion, infrastructure replacement, and cost reduction projects. Capital spending during the first quarter
of fiscal 2006 related to a variety of projects, the largest was related to a fertilizer terminal expansion project. Spending on the acquisition of businesses was $13.6 million in the first quarter of fiscal 2007 compared to no spending in the first
quarter of fiscal 2006. The investing cash flows used for the acquisitions of UAP Timberland and one distribution location were partially offset by proceeds from the sale of assets of $7.5 million, most notably some of our retail locations in
Western Canada.

Cash flows provided by financing activities were $5.1 million in the thirteen weeks ended May 28, 2006, compared to $22.5 million in
the thirteen weeks ended May 29, 2005. Cash flows provided by financing activities reflect a $9.5 million dividend paid to stockholders during the quarter. There were no dividends paid last year during the first quarter. Additionally, we
actively manage our cash balances, which results in a check float on zero balance accounts. The net change in float (checks not yet presented) was $12.9 million and $23.6 million for the periods ending May 28, 2006, and May 29, 2005,
respectively.

Credit Facility.At May 28, 2006, there was $500.0 million of borrowing availability under the revolving credit facility
and United Agri Products, Inc. had borrowing capacity of $475.9 million after giving effect to $24.1 million of letters of credit under the sub-facility. At May 28, 2006, and May 29, 2005, we had no debt outstanding under our revolving
credit facility. This credit facility was refinanced in June 2006. (See Recent Developments above and Note 14 in Notes to Financial Statements.)

Since inception of the credit facility, we have been in compliance with its financial covenants. During the fifty-two weeks ended May 28, 2006, outstanding borrowings (net of offsetting cash and cash equivalents) reached a period end
peak of $276.3 million on October 23, 2005, while cash on hand reached a period end peak of $79.2 million on February 26, 2006.

Obligations
and Commitments

As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as lease
agreements, debt agreements and unconditional purchase obligations (i.e., obligations to transfer funds in the future for fixed or



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minimum quantities of goods or services at fixed or minimum prices, such as take-or-pay contracts). We enter into unconditional purchase
obligation arrangements in the normal course of business to ensure that adequate levels of sourced product are available to us. There were no material changes outside the ordinary course of business during the thirteen weeks ended May 28, 2006.

Holding Company

As a holding company, our investments
in our operating subsidiaries, including United Agri Products, constitute substantially all of our operating assets. Consequently, our subsidiaries conduct all of our consolidated operations and own substantially all of our operating assets. Our
principal source of the cash required to pay our and our subsidiaries obligations and to repay the principal amount of our and our subsidiaries obligation, is the cash that our subsidiaries generate from their operations and our
borrowings under the revolving credit facility. Our subsidiaries are separate and distinct legal entities and have no obligations to make funds available to us. The terms of our credit facility generally restrict our subsidiaries from paying
dividends, making loans or other distributions and otherwise transferring assets to us. Furthermore, our subsidiaries are permitted under the terms of the new revolving credit facility and the indentures governing the 81/4% Senior Notes and 103/4% Senior Discount Notes to incur additional indebtedness that may severely restrict or prohibit the making of distributions, the payment of dividends or the making of loans
by such subsidiaries to us. We cannot assure you that the agreements governing our current and future indebtedness will permit our subsidiaries to provide us with sufficient dividends, distributions or loans to fund scheduled interest and principal
payments on our indebtedness when due. If we consummate an acquisition, our debt service requirements could increase. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to
refinance any of our indebtedness on commercially reasonable terms or at all.

Dividend Policy

Currently we intend to pay quarterly cash dividends on our common stock at an annual rate of $0.75 per share. On April 4, 2006, our board declared a quarterly
dividend on our common stock in the amount of $0.1875 per share. The record date for the dividend payment was May 15, 2006, and the payment date was June 1, 2006.

There are no assurances that we will declare or pay any cash dividends in the future. The declaration and payment of future dividends to holders of our common stock is at the discretion of our board of directors and
depends upon many factors, including our financial condition, earnings, legal requirements, restrictions in our debt agreements and other factors our board of directors deems relevant. The terms of our new senior secured credit facility (see
Recent Developments), may also restrict us from paying cash dividends on our common stock under some circumstances. As of May 28, 2006, management believes approximately $60.9 million of permitted distributions were available to pay
dividends under our restricted payment covenant in our indenture governing the 103/4% Senior Discount Notes before giving effect to the June 1, 2006 dividend payment of $9.5 million. Under
the new credit facility entered into on June 1, 2006, management believes that the permitted distributions available to pay dividends under the new restricted payment covenant would be approximately $75.0 million before giving effect to the
June 1, 2006 dividend payment of $9.5 million.

Cash flow provided by our operating activities is highly variable due to the seasonality of our
business, resulting in negative cash flow during certain periods. Because of the variability, if our cash flows from operating activities are insufficient to fund dividend payments at intended levels, we may need to reduce or eliminate dividends or,
to the extent permitted by our debt agreements, fund all or part of the dividends with additional debt or other sources of cash. To the extent we pay dividends, the amount of cash available to us to pay the principal and interest on our outstanding
debt will be reduced. A failure to pay the principal or interest on our debt would constitute an event of default under the applicable debt agreements, giving the holders of the debt the right to accelerate its maturity. If any of our debt is
accelerated, we may not have sufficient cash available to repay it in full and we may be unable to refinance it on satisfactory terms or at all. An event of default under debt agreements, or an acceleration of the debt, could also trigger an event
of default under other debt agreements. Furthermore, if we fund dividends with additional debt, our interest expense will increase, which may cause a further reduction in the amount of cash available to us.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The process of preparing
our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP), requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities,
revenue, and expenses, and the accompanying note disclosures. The estimates made by management are based on historical experience combined with managements understanding of current facts and circumstances. Actual results could differ from
these estimates, and changes in these estimates are recorded when known. Management identifies critical accounting estimates as:



| |  |  | those that require the use of assumptions about matters that are inherently and highly uncertain at the time the estimates are made; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | those for which changes in the estimates, judgments, or assumptions, or the use of different estimates, judgments, and assumptions, could have a material impact on our consolidated
and combined results of operations or financial condition.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management has discussed the development, selection, and disclosure of critical
accounting policies and estimates with the Audit Committee of our board of directors. We believe that our most critical accounting policies and estimates, those which are both important to the portrayal of our financial condition and results of
operations and require the most difficult, subjective, complex, or significant judgment on the part of management, are the following:



| |  |  | Allowance for Doubtful Accounts;
| | - |  | --------------------------------



| |  |  | Inventory Valuation and Reserves; and
| | - |  | -------------------------------------



| |  |  | Vendor Rebates Receivable.
| | - |  | --------------------------

There has been no material change in
accounting policies considered critical by our management. However we have refined our methodology for estimating chemical rebates earned in response to changes in supplier rebate programs through the use of an internally developed tracking system.
Under GAAP, rebates are recorded when it is probable that we will earn the rebate, the amount is reasonably estimable and the rebate is covered by a written agreement with the supplier. Due to changes in vendor programs and enhancements to our
rebate tracking system, we have accrued more rebate earnings in the first quarter of fiscal 2007 as compared to the same period in fiscal 2006. This has partially contributed to our improved operating results. Decisions as to when and how much
rebate earnings should be recorded are estimates, which require significant judgment by management, based on an analysis of vendor programs (especially those with tiered levels of rebates which can be earned), operating performance to date, and
expectations of operating performance for the balance of the crop year, all of which can vary from year-to-year. Because the probable and reasonably estimable concepts imply that a relatively high level of assurance should
exist before accruing rebates, true-ups of rebate accruals, if required, will tend to be positive. Where uncertainty exists such that the rebate is not reasonably estimated or probable, rebates are recognized as the related milestones are achieved.
Given our operating cycle and the crop-year basis of all significant rebate programs, true-ups of rebate accruals, if required, usually occur in the third or fourth quarter of our fiscal year.

For a discussion of the Companys critical accounting policies and estimates, please see our Annual Report on Form 10-K for the year ended February 26, 2006.
We have not changed these policies and estimates from those previously disclosed.

Forward-Looking Statements

This report includes forward-looking statements that involve risks and uncertainties. Forward-looking statements include statements concerning our plans,
objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information and, in
particular, appear under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations. When used in this report, the words estimates, expects, anticipates,
projects, plans, intends, believes, forecasts, foresees, likely, may, should, goal, target, and variations of such
words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon information available to us on the date of this report.

These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control that could cause actual results to differ materially from the results discussed in the
forward-looking statements including, among other things, the matters discussed in this report under this Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. Such risks, uncertainties and
other factors may include, among others:



| |  | general economic and business conditions;
|- |  | -----------------------------------------



| |  | industry trends;
|- |  | ----------------



| |  | restrictions contained in our debt agreements;
|- |  | ----------------------------------------------



| |  | our substantial leverage, including the inability to generate the necessary amount of cash to service our existing debt and the incurrence of substantial indebtedness in the future;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the seasonality of our business and weather conditions;
|- |  | -------------------------------------------------------



| |  | the possibility of liability for pollution and other damage that is not covered by insurance or that exceeds our insurance coverage;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  | increased competition in the markets in which we operate;
|- |  | ---------------------------------------------------------



| |  | our dependence on rebate programs to attain profitability;
|- |  | ----------------------------------------------------------



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| |  | our dependence on a limited number of key executives who we may not be able to adequately replace if they leave our company;
|- |  | ----------------------------------------------------------------------------------------------------------------------------



| |  | changes in government regulations, agricultural policy, and environmental, health, and safety laws and regulations;
|- |  | -------------------------------------------------------------------------------------------------------------------



| |  | changes in business strategy, development plans, or cost savings plans;
|- |  | -----------------------------------------------------------------------



| |  | our ability to integrate newly acquired operations into our existing operations;
|- |  | --------------------------------------------------------------------------------



| |  | the loss of any of our major suppliers or the bankruptcy or financial distress of our customers;
|- |  | ------------------------------------------------------------------------------------------------



| |  | the ability to attain and maintain any price increases for our products;
|- |  | ------------------------------------------------------------------------



| |  | availability, terms, and deployment of capital; and
|- |  | ---------------------------------------------------



| |  | other factors over which we have little or no control.
|- |  | ------------------------------------------------------

These risks and
certain other uncertainties are discussed in more detail in our Annual Report on Form 10-K for the fiscal year ended February 26, 2006, under the caption Item 1A. Risk Factors.

There may be other factors, including those discussed elsewhere in this report, which could cause our actual results to differ materially from the results referred to in
the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this report and are expressly qualified in their entirety by the cautionary statements included in this
report. We undertake no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.



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|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|------- | -----------------------------------------------------------

Market
risks affecting our business are exposure to changes in energy prices, foreign currency risks, and interest rate risks.

Our average borrowings under the
revolving credit agreement (net of offsetting cash and cash equivalents) for the fifty-two week period ended May 28, 2006, were approximately $90.5 million. The revolving credit facility is affected by changes in interest rates. Based upon the
amount of our average period end borrowings (net of offsetting cash and cash equivalents) for the fifty-two week period ended May 28, 2006, a one percentage point change in the assumed weighted average interest rate on such credit facility
would change our annual interest expense by $0.9 million.

Our foreign currency risk is limited primarily to the exchange rate differential in the Canadian
and US dollar. The exchange rate was 0.9045, 0.8711, and 0.7976, at May 28, 2006, February 26, 2006, and May 29, 2005, respectively. The exchange rate has been between 0.85360 and 0.9090 for the thirteen weeks ended May 28, 2006.
A 1% change in the exchange rate, if not hedged, has approximately a $0.3 million impact on the balance sheet value.

Changes in energy prices have a
direct impact on our fuel costs. The national average per gallon price of diesel fuel has increased from $2.16 to $2.88 and gasoline has increased from $2.05 to $2.78 as of May 29, 2005 and May 28, 2006, respectively. These price increases
impact our supply chain and selling expenses. Based on our usage mix of these two fuels, we estimate that on average we have experienced nearly a 23.1% increase in fuel prices year over year through the first quarter, contributing to an increase in
our fuel expenses of $1.6 million compared to last year. Based on our estimated annual usage, a $0.13 increase in the annual average per gallon price of fuel would increase our fuel expense by $1.0 million. Higher fuel prices also affect our
customers such that higher expenses for fuel and higher prices for fertilizer inputs may reduce the cash or credit available to our customers with which they purchase other inputs or services from us.

Our on hand inventory of fertilizer products has price risk related to changes in energy prices. Our total fertilizer inventories on hand were approximately $86.8
million, $140.4 million, and $83.6 million as of May 28, 2006, February 26, 2006, and May 29, 2005, respectively. Of our total fertilizer inventory, approximately $39.8 million, $77.0 million, and $37.1 million as of May 28,
2006, February 26, 2006, and May 29, 2005, respectively, were considered by the fertilizer industry to be nitrogen based and therefore price sensitive to the price of natural gas. Natural gas is the key ingredient in the manufacture of
these products. While a direct relationship cannot be established due to alternative sources of fertilizer products, such as imports or substitute products, price risk does exist.



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|ITEM 4. | CONTROLS AND PROCEDURES.
|------- | ------------------------

As of the end of the period covered by
this report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as they related to our business (Disclosure Controls). This evaluation (Controls Evaluation) was
done under the supervision and with the participation of management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO).

Our management, including the CEO and CFO, does not expect that our Disclosure Controls or our internal controls over financial reporting (Internal Controls) will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances
of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by
the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Based upon the Controls Evaluation, the CEO and CFO have concluded that the Disclosure Controls are effective as of the end of the period covered by this report. There have been no significant changes in our internal
controls or in other factors that could significantly affect internal controls subsequent to the date we carried out this evaluation. In addition, there have been no changes in our internal control over financial reporting that have occurred during
the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II. OTHER INFORMATION

Items 1, 1A., 2, 3, 4, and 5 are not applicable and have been omitted.



|ITEM 6. | EXHIBITS
|------- | --------



|     |  |                                                                                                                                                                                  
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                       
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                       



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.

Date: July 6, 2006



|                               |  |                                                                                                                                         
|------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------
|UAP HOLDING CORP. (Registrant)
|                               | 
|By:                            |  | /s/ David W. Bullock                                                                                                                    
|                               |  | David W. Bullock                                                                                                                        
|                               |  | Executive Vice President and Chief Financial Officer (Principal Financial Officer and duly authorized signatory on behalf of Registrant)
|                               | 
|By:                            |  | /s/ Alan Kessock                                                                                                                        
|                               |  | Alan Kessock                                                                                                                            
|                               |  | Chief Accounting Officer (Principal Accounting Officer)                                                                                 



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