**UNITEDSTATES****SECURITIES AND EXCHANGE COMMISSION****WASHINGTON, D.C. 20549**

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**FORM10-Q**

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**x****                      ****QUARTERLY REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For thequarterly period ended May 27, 2007**

**OR**

**o****                         ****TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For thetransition period from            to             .**

**CommissionFile Number  000-51035**

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**UAPHolding Corp.** (Exact Name ofRegistrant as Specified in Its Charter)

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| **Delaware**                               |   | **11-3708834**       |
|--------------------------------------------|--------|----------------------|
| (State or Other  Jurisdiction of           |   | (I.R.S. Employer     |
| Incorporation or  Organization)            |   | Identification  No.) |
|                                       |   |                 |
| **7251 W.  4th Street, Greeley, Colorado** |   | **80634**            |
| (Address of  Principal Executive Offices)  |   | (Zip Code)           |

**(970)356-4400** (Registrant’s TelephoneNumber, Including Area Code)

**Notapplicable** (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 forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90days.    Yes  x    No  o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act.

Large accelerated filer  x    Accelerated filer  o    Non-accelerated filer  o

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o    No  x

| **Class**                                 | ** ** | **Outstanding at June  29, 2007** |
|-------------------------------------------|------------|---------------------------------------------|
| Common Stock,  par value $0.001 per share |       | 51,959,272  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          |
| **Consolidated Balance Sheets**                                                                              | ** ** | 4          |
| **Consolidated Statements of Earnings**                                                                      | ** ** | 5          |
| **Consolidated Statements of Cash Flows**                                                                    | ** ** | 6          |
| **Consolidated Statement of Stockholders’ Equity**                                                      | ** ** | 7          |
| **Notes to Consolidated Financial Statements**                                                               | ** ** | 8          |
|                                                                                                         |       |       |
| **ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS** | ** ** | 16         |
|                                                                                                         |       |       |
| **ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**                                 | ** ** | 24         |
|                                                                                                         |       |       |
| **ITEM 4. CONTROLS AND PROCEDURES**                                                                     | ** ** | 25         |
|                                                                                                         |       |       |
| ***Part  II. Other Information***                                                                       | ** ** | 26         |
|                                                                                                         |       |       |
| **ITEM 6.  EXHIBITS**                                                                                   | ** ** | 26         |
|                                                                                                         |       |       |
| ***SIGNATURES***                                                                                             | ** ** | 27         |

 

2

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**PARTI. FINANCIAL INFORMATION**

**ITEM 1.****                              FINANCIALSTATEMENTS**

**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directors and Stockholders of UAPHolding Corp.

Greeley, Colorado

We have reviewed the accompanying consolidated balancesheets of UAP Holding Corp. and subsidiaries (the “Company”) as of May 27, 2007,and May 28, 2006, the related consolidated statements of earnings forthe thirteen weeks ended May 27, 2007, and May 28, 2006,the consolidated statements of cash flows for the thirteen weeks ended May 27,2007, and May 28, 2006, and the consolidated statement of stockholders’ equityfor the thirteen weeks ended May 27, 2007. These interim financial statementsare the responsibility of the Company’s management.

We conducted our reviews in accordance with thestandards of the Public Company Accounting Oversight Board (United States). Areview of interim financial information consists principally of applyinganalytical procedures and making inquiries of persons responsible for financialand accounting matters. It is substantially less in scope than an auditconducted in accordance with the standards of the Public Company AccountingOversight Board (United States), the objective of which is the expression of anopinion regarding the financial statements taken as a whole. Accordingly, we donot express such an opinion.

Based on our reviews, we are not aware of any materialmodifications that should be made to such consolidated interim financialstatements for them to be in conformity with accounting principles generallyaccepted in the United States of America.

We have previously audited, in accordance with thestandards of the Public Company Accounting Oversight Board (United States), theconsolidated balance sheet of UAP Holding Corp. and subsidiaries as of February25, 2007, and the related consolidated statements of earnings, stockholders’equity, and cash flows for the year then ended (not presented herein); and inour report dated April 24, 2007, we expressed an unqualified opinion onthose consolidated financial statements. In our opinion, the information setforth in the accompanying consolidated balance sheet as of February 25, 2007,is fairly stated, in all material respects, in relation to the consolidatedbalance sheet from which it has been derived.

DELOITTE & TOUCHE LLP

Denver, Colorado

June 29, 2007

3

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**UAPHOLDING CORP.****CONSOLIDATED BALANCE SHEETS**(in thousands, except share data)**UNAUDITED**
| ** **                                                                                                                                 | ** ** | **May 27, 2007** | ** ** | **February 25, 2007** | ** ** | **May 28, 2006** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------|------------|---------------------------------|------------|----------------------------|------------|
| **ASSETS**                                                                                                                                 |       |                       |       |                            |       |                       |       |
| Current assets:                                                                                                                            |       |                       |       |                            |       |                       |       |
| Cash and cash  equivalents                                                                                                                 |       | $                          | 13,049     |                            | $          | 19,506                     |       | $ | 29,800 |   |
| Receivables,  less allowance for doubtful accounts   of $20,840, $15,735, and $14,634                                                      |       | 1,280,852                  |       | 338,229                         |       | 1,131,516                  |       |
| Inventories                                                                                                                                |       | 793,749                    |       | 883,033                         |       | 714,215                    |       |
| Deferred income  taxes                                                                                                                     |       | 27,887                     |       | 28,046                          |       | 21,546                     |       |
| Vendor prepay                                                                                                                              |       | 10,558                     |       | 64,700                          |       | 9,833                      |       |
| Other current  assets                                                                                                                      |       | 10,116                     |       | 8,547                           |       | 5,642                      |       |
| Total current  assets                                                                                                                      |       | 2,136,211                  |       | 1,342,061                       |       | 1,912,552                  |       |
| Property, plant and  equipment                                                                                                             |       | 154,575                    |       | 145,455                         |       | 119,264                    |       |
| Less accumulated  depreciation                                                                                                             |       | (38,204                    | )          | (35,234                         | )          | (26,793                    | )          |
| Property, plant  and equipment, net                                                                                                        |       | 116,371                    |       | 110,221                         |       | 92,471                     |       |
| Intangible assets, net                                                                                                                     |       | 48,259                     |       | 50,076                          |       | 26,255                     |       |
| Goodwill                                                                                                                                   |       | 45,581                     |       | 45,138                          |       | 35,551                     |       |
| Deferred income taxes                                                                                                                      |       | 5,321                      |       | 4,448                           |       | 8,674                      |       |
| Debt issue costs, net                                                                                                                      |       | 5,144                      |       | 5,445                           |       | 15,957                     |       |
| Other assets                                                                                                                               |       | 1,766                      |       | 1,797                           |       | 1,715                      |       |
| Total assets                                                                                                                               |       | $                          | 2,358,653  |                            | $          | 1,559,186                  |       | $ | 2,093,175 |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                             |       |                       |       |                            |       |                       |       |
| Current liabilities:                                                                                                                       |       |                       |       |                            |       |                       |       |
| Accounts payable                                                                                                                           |       | $                          | 1,434,026  |                            | $          | 926,632                    |       | $ | 1,408,791 |   |
| Short-term debt                                                                                                                            |       | 313,278                    |       | 184,739                         |       | 133,784                    |       |
| Income taxes  payable                                                                                                                      |       | 37,357                     |       | —                          |       | 24,901                     |       |
| Accrued payroll  and related liabilities                                                                                                   |       | 27,733                     |       | 5,820                           |       | 26,675                     |       |
| Deferred income  taxes                                                                                                                     |       | 2,214                      |       | 2,200                           |       | 1,496                      |       |
| Other accrued  liabilities                                                                                                                 |       | 93,441                     |       | 72,631                          |       | 89,514                     |       |
| Total current  liabilities                                                                                                                 |       | 1,908,049                  |       | 1,192,022                       |       | 1,685,161                  |       |
| Long-term debt                                                                                                                             |       | 171,953                    |       | 172,390                         |       | 175,347                    |       |
| Deferred income taxes                                                                                                                      |       | 17,097                     |       | 17,953                          |       | 19,152                     |       |
| Other non-current  liabilities                                                                                                             |       | 9,585                      |       | 6,567                           |       | 1,854                      |       |
| Commitments and  contingencies (Note 14)                                                                                                   |       |                       |       |                            |       |                       |       |
| Stockholders’ equity:                                                                                                                 |       |                       |       |                            |       |                       |       |
| Common stock,  $.001 par value, 90,000,000 shares authorized, 51,534,193, 51,194,620, and  50,967,958 issued and outstanding, respectively |       | 52                         |       | 51                              |       | 51                         |       |
| Management stock  — rabbi trust                                                                                                       |       | —                     |       | —                          |       | 1,978                      |       |
| Additional  paid-in capital                                                                                                                |       | 143,577                    |       | 138,569                         |       | 121,661                    |       |
| Retained  earnings                                                                                                                         |       | 102,642                    |       | 27,801                          |       | 81,377                     |       |
| Accumulated  other comprehensive income                                                                                                    |       | 5,698                      |       | 3,833                           |       | 6,594                      |       |
| Stockholders’  equity                                                                                                                 |       | 251,969                    |       | 170,254                         |       | 211,661                    |       |
| Total liabilities and  stockholders’ equity                                                                                           |       | $                          | 2,358,653  |                            | $          | 1,559,186                  |       | $ | 2,093,175 |   |

The accompanying notesare an integral part of the financial statements.

4

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**UAPHOLDING CORP.****CONSOLIDATED STATEMENTS OF EARNINGS**(in thousands, except share data)**UNAUDITED**
|                                                             | ** ** | **Thirteen Weeks Ended** | ** ** |
|-------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                  | ** ** | **May 27, 2007**         | ** ** | **May 28, 2006** | ** ** |
| Net sales                                                   |       | $                                  | 1,605,018  |   | $ | 1,398,023 |   |
| Cost of goods sold                                          |       | 1,365,017                          |       | 1,212,374 |   |
| Gross profit                                                |       | 240,001                            |       | 185,649 |   |
| Selling, general and administrative expenses                |       | 98,973                             |       | 88,974 |   |
| Royalties, service charges and other (income) and  expenses |       | (9,298                             | )          | (7,348 | ) |
| Operating income                                            |       | 150,326                            |       | 104,023 |   |
| Interest expense, net                                       |       | 7,996                              |       | 8,289 |   |
| Finance related and other charges                           |       | —                             |       | 482 |   |
| Income before income taxes                                  |       | 142,330                            |       | 95,252 |   |
| Income tax expense                                          |       | 54,647                             |       | 36,936 |   |
| Net income                                                  |       | $                                  | 87,683     |   | $ | 58,316 |   |
| Earnings per share:                                         |       |                               |       |   |   |
| Basic                                                       |       | $                                  | 1.71       |   | $ | 1.15 |   |
| Diluted                                                     |       | $                                  | 1.66       |   | $ | 1.11 |   |
| Cash dividends declared per share of common stock           |       | $                                  | 0.2250     |   | $ | 0.1875 |   |
| Weighted average shares outstanding:                        |       |                               |       |   |   |
| Basic                                                       |       | 51,425,987                         |       | 50,851,510 |   |
| Diluted                                                     |       | 52,759,521                         |       | 52,370,178 |   |

The accompanying notesare an integral part of the financial statements.

5

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**UAPHOLDING CORP.****CONSOLIDATED STATEMENTS OF CASH FLOWS**(in thousands)**UNAUDITED**

 
| ** **                                                                      | ** ** | **Thirteen Weeks Ended** | ** ** |
|---------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                      | ** ** | **May 27, 2007**         | ** ** | **May 28, 2006** | ** ** |
| **Operations**                                                                  |       |                               |       |   |   |
| Net income                                                                      |       | $                                  | 87,683     |   | $ | 58,316 |   |
| Adjustments to reconcile net income to net cash used  for operating activities: |       |                               |       |   |   |
| Depreciation                                                                    |       | 3,080                              |       | 2,876 |   |
| Stock compensation                                                              |       | 1,762                              |       | 836 |   |
| Amortization of intangibles                                                     |       | 1,817                              |       | 433 |   |
| Deferred taxes                                                                  |       | (1,869                             | )          | 646 |   |
| Accretion of discount on notes                                                  |       | —                             |       | 2,792 |   |
| Other                                                                           |       | (1,608                             | )          | 850 |   |
| Change in operating assets and liabilities, net of  effects of acquisitions:    |       |                               |       |   |   |
| Increase in receivables, net                                                    |       | (940,287                           | )          | (807,871 | ) |
| Increase in current liabilities and non-current  liabilities                    |       | 587,676                            |       | 603,886 |   |
| Decrease in inventory                                                           |       | 90,001                             |       | 31,884 |   |
| Decrease in other operating assets and liabilities                              |       | 53,657                             |       | 63,457 |   |
| Net cash used for operations                                                    |       | (118,088                           | )          | (41,895 | ) |
| **Investing**                                                                   |       |                               |       |   |   |
| Additions to property, plant and equipment                                      |       | (8,756                             | )          | (6,703 | ) |
| Additions to purchase price of previous acquisitions                            |       | (4,294                             | )          | — |   |
| Proceeds from sales of assets                                                   |       | 44                                 |       | 7,542 |   |
| Acquisition of business, net of cash acquired                                   |       | —                             |       | (13,627 | ) |
| Net cash used for investing                                                     |       | (13,006                            | )          | (12,788 | ) |
| **Financing**                                                                   |       |                               |       |   |   |
| Net borrowings on revolving line of credit                                      |       | 128,483                            |       | — |   |
| Dividends paid                                                                  |       | (9,599                             | )          | (9,528 | ) |
| Excess income tax benefits from stock-based  compensation arrangements          |       | 4,418                              |       | 1,572 |   |
| Checks not yet presented                                                        |       | 1,531                              |       | 12,906 |   |
| Other                                                                           |       | 107                                |       | 123 |   |
| Net cash provided by financing                                                  |       | 124,940                            |       | 5,073 |   |
| Net effect of  exchange rates on cash and cash equivalents                      |       | (303                               | )          | 242 |   |
| Net change in cash and cash equivalents                                         |       | (6,457                             | )          | (49,368 | ) |
| Cash and cash  equivalents at beginning of period                               |       | 19,506                             |       | 79,168 |   |
| Cash and cash  equivalents at end of period                                     |       | $                                  | 13,049     |   | $ | 29,800 |   |
| Supplemental  disclosure of cash flow information:                              |       |                               |       |   |   |
| Cash paid during the period for interest                                        |       | $                                  | 7,946      |   | $ | 662 |   |
| Cash paid during the period for income taxes                                    |       | $                                  | 250        |   | $ | 1,251 |   |
| Dividends  declared but not yet paid                                            |       | $                                  | 11,595     |   | $ | 9,545 |   |

The accompanying notesare an integral part of the financial statements.

6

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**UAPHOLDING CORP.****CONSOLIDATED STATEMENT OF STOCKHOLDERS’EQUITY**(in thousands)**UNAUDITED**
| **Thirteen Weeks Ended  May 27, 2007**              | ** ** | **Common  Stock** | ** ** | **Additional  Paid in  Capital** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other  Comprehensive  Income** | ** ** | **Total  Stockholders’  Equity** | ** ** |
|-------------------------------------------------------------------------|------------|-------------------|------------|---------------------------------------|------------|------------------------|------------|-----------------------------------------------|------------|---------------------------------------|------------|
| Balance at  February 25, 2007                                           |       | $                 | 51         |                                  | $          | 138,569                |       | $                                             | 27,801     |                                  | $          | 3,833 |   | $ | 170,254 |   |
| Adoption of FASB  Interpretation No. 48                                 |       | —            |       | —                                |       | (1,247                 | )          | —                                        |       | (1,247                                | )          |
| Adjusted balance at beginning of period                                 |       | 51                |       | 138,569                               |       | 26,554                 |       | 3,833                                         |       | 169,007                               |       |
| Comprehensive  income:                                                  |       |              |       |                                  |       |                   |       |                                          |       |                                  |       |
| Net income                                                              |       | —            |       | —                                |       | 87,683                 |       | —                                        |       | 87,683                                |       |
| Cash flow hedges                                                        |       | —            |       | —                                |       | —                 |       | 538                                           |       | 538                                   |       |
| Foreign currency translation adjustment                                 |       | —            |       | —                                |       | —                 |       | 1,327                                         |       | 1,327                                 |       |
| Total comprehensive income                                              |       |              |       |                                  |       |                   |       |                                          |       | 89,548                                |       |
| Exercise of  stock options                                              |       | 1                 |       | 544                                   |       | —                 |       | —                                        |       | 545                                   |       |
| Stock  compensation — stock options and restricted stock units     |       | —            |       | 1,925                                 |       | —                 |       | —                                        |       | 1,925                                 |       |
| Stock and stock  options income tax benefits                            |       | —            |       | 4,418                                 |       | —                 |       | —                                        |       | 4,418                                 |       |
| Holdback for  payroll taxes on restricted stock units vested and issued |       | —            |       | (1,879                                | )          | —                 |       | —                                        |       | (1,879                                | )          |
| Dividend to  stockholders                                               |       | —            |       | —                                |       | (11,595                | )          | —                                        |       | (11,595                               | )          |
| Balance at May 27, 2007                                                 |       | $                 | 52         |                                  | $          | 143,577                |       | $                                             | 102,642    |                                  | $          | 5,698 |   | $ | 251,969 |   |

The accompanying notesare an integral part of the financial statements.

7

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**UAPHOLDING CORP.**

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS****For the Thirteen Week Periods Ended May 27,2007, and May 28, 2006**

**UNAUDITED**

**1. Description of the Business andSignificant Accounting Policies**

***Interim FinancialStatements.***The accompanying unaudited consolidatedfinancial statements of UAP Holding Corp. and its subsidiaries (the “Company,” “UAP,”“we,” “us,” and “our”) have been prepared in accordance with accountingprinciples generally accepted in the United States of America (“GAAP”) for interimfinancial information and reflect all adjustments (consisting of normalrecurring accruals and changes in estimates) which, in the opinion ofmanagement, are necessary for a fair presentation of the financial position,operating results, and cash flows for the periods presented. The resultsreported in these interim financial statements are not necessarily indicativeof the results that may be reported for the entire year. These financialstatements should be read in conjunction with the consolidated and combinedfinancial statements and notes thereto contained in our Annual Report on Form10-K for the fiscal year ended February 25, 2007.

***Business.***UAPHolding Corp. is the largest independent distributor of agricultural andprofessional non-crop inputs in the United States and Canada. We market acomprehensive line of products including chemicals, fertilizer, and seed tofarmers, commercial growers, and regional dealers. We have approximately 370distribution, storage, and sales locations. We also have three formulationfacilities where we blend products primarily for sale by our distributionfacilities.

***Fiscal Year.***Ourfiscal year includes a 52- or 53-week period ending on the last Sunday inFebruary. The fifty-two weeks endedFebruary 24, 2008, will be referred to as “fiscal 2008,”and the fifty-twoweeks ended February 25, 2007 will bereferred to as “fiscal 2007.”

***Seasonality.***Our business is seasonal based upon the planting, growing, and harvestingcycles of our customers’ operations. Because of this seasonality, we experiencesignificant fluctuations in our revenues, income, and net working capitallevels. During the last three years, as a result of the condensed nature of theplanting season, more than 75% of our net sales occurred during the first andsecond fiscal quarters. Weather conditions and changes in the mix of cropsplanted can also cause quarterly results to vary.

***Use of Estimates.***The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and assumptions. These estimates or assumptionsaffect reported amounts of assets, liabilities, revenue, and expenses asreflected in the financial statements. Actual results could differ from thoseestimates and the differences could be material.

***Vendor RebateReceivables.*** We receive vendor rebates, primarily fromour chemical and seed suppliers. These rebates are usually covered by bindingagreements and published programs but can also be open-ended, subject to futuredefinition or revision. Rebates earned are generally based on achievingtargeted sales, purchases, volume tiers, or on achieving targeted sales growthor market share growth rates.

Rebates typically cover performance during the crop year,which is based on the planting, growing, and harvesting cycles and differs fromour fiscal year. The crop year for fiscal 2008 began as early as September 2006and will end as late as December 31, 2007, depending on the supplier.Because of the timing of the crop year relative to our fiscal year and becauseour vendor programs are typically not multi-year programs, the rebate incomeearned and recognizable for the crop year ended during the current fiscal yearwill largely be received by our fiscal year-end and the related rebate incomerecognized.   Since we estimate rebatesearned from our suppliers throughout the year, changes in estimates can impactour margin percentages by quarter.  Theprograms that start late in one fiscal year and conclude in the subsequentfiscal year typically will not result in significant income in the startingfiscal year because sales activity during that period, the winter season, issignificantly less.

Rebates that are probable and reasonably estimable areaccrued at expected rates based on total estimated crop year performance.Rebates that are not probable or estimable are accrued when certain milestonesare achieved. Rebates not covered by binding agreements or published vendorprograms are accrued when conclusive documentation of right of receipt isobtained.

Rebates based on the amount of materials purchasedreduce cost of goods sold as inventory is sold. Rebates that are based on salesvolume are offset to cost of goods sold when we determine they have been earnedbased on our sales volume of related products.

8

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***Earnings Per Share.***Earnings per share are based on the weighted average number of shares of commonstock outstanding during the period as follows:

|                                                                                                 | ** ** | **Thirteen Weeks Ended**                        | ** ** |
|-------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| **Earnings per share**                                                                | ** ** | **May 27, 2007**                                | ** ** | **May 28, 2006** | ** ** |
| ** **                                                                                      | ** ** | **(in thousands, except share data)** | ** ** |
| Net income                                                                                      |       | $                                                         | 87,683     |   | $ | 58,316 |   |
| Weighted average  shares of common stock outstanding used in computing basic earnings per share |       | 51,425,987                                                |       | 50,851,510 |   |
| Net effect of  dilutive stock options and restricted stock units                                |       | 1,333,534                                                 |       | 1,518,668 |   |
| Weighted average  shares of common stock used in computing diluted earnings per share           |       | 52,759,521                                                |       | 52,370,178 |   |
| Basic earnings  per share                                                                       |       | $                                                         | 1.71       |   | $ | 1.15 |   |
| Diluted earnings per  share                                                                     |       | $                                                         | 1.66       |   | $ | 1.11 |   |

**2. Accounting Developments**

***Adoption of NewAccounting Pronouncement.***

In June 2006, the Financial Accounting Standards Board(“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty inIncome Taxes” (“FIN No. 48”), which clarifies the accounting for uncertainty inincome taxes recognized in an enterprise’s financial statements in accordancewith Statement of Financial Accounting Standards No. 109, “Accounting forIncome Taxes” (“SFAS 109”). This interpretation prescribes a recognitionthreshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return.This interpretation also provides guidance on derecognition, classification,interest and penalties, accounting in interim periods, disclosure, andtransition. FIN No. 48 was effective for fiscal years beginning afterDecember 15, 2006.

On February 26, 2007, the Company adopted theprovisions of FIN No. 48. The cumulative effect of adoption was a $1.2million reduction of retained earnings. At February 25, 2007, the total amountof unrecognized tax benefits was $4.4 million, all of which would impact theeffective tax rate, if recognized.  Approximately$4.1 million of the unrecognized tax benefits are reflected in “Othernon-current liabilities.”

Interest and penalties associated with uncertain taxpositions are recognized as components of “Income tax expense.” The Company’saccrual for interest and penalties was $0.2 million upon adoption of FINNo. 48.

The U.S. Internal Revenue Service has submitted itsexamination findings allowing our requested refund for the tax years of fiscal2004 and fiscal 2005 to the Joint Committee of Taxation for approval.  The results of the examination have beenreflected in the financial statements. The Company is subject to US federal,state, local and Canadian income tax audits by taxing authorities for fiscal 2004through fiscal 2007. It is reasonably possible that the amount of unrecognizedtax benefits could change in the next 12 months but an estimate of the rangecannot be made at this time.

***Recent AccountingPronouncements.***

In September 2006, the FASB issued Statement ofFinancial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS157”). This standard defines fair value, establishes a framework for measuringfair value in generally accepted accounting principles, and expands disclosuresabout fair value measurements. SFAS 157 is effective for fiscal years beginningafter November 15, 2007 and interim periods within such years. We willadopt SFAS 157 in our first quarter of fiscal 2009, as required. We arecurrently evaluating the new standard. However, the adoption of SFAS 157 is notexpected to have a material impact on our business, financial condition, cashflow, results of operations, or liquidity.

In February 2007, the FASB issued Statement ofFinancial Accounting Standard No. 159, “The Fair Value Option forFinancial Assets and Financial Liabilities” (“SFAS 159”). This statementpermits entities to choose to measure many financial instruments and certainother items at fair value that are not currently required to be measured atfair value. The objective is to improve financial reporting by providingentities with the opportunity to mitigate volatility in reported earningscaused by measuring related assets and liabilities differently without havingto apply complex hedge accounting provisions. This statement requires abusiness entity to report unrealized gains and losses on items for which thefair value option has been elected in earnings at each subsequent reportingdate. An entity may decide whether to elect the fair value option for eacheligible item on its election date, subject to certain requirements describedin the statement. This statement is effective as of the beginning of eachreporting entity’s first fiscal year that begins after November 15, 2007.We will adopt SFAS 159 in our first quarter of fiscal 2009, as required. We arecurrently reviewing the requirements of this statement and, at this point in 

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time, we cannot determine the impact, if any, thatthis statement may have on our business, financial condition, cash flow,results of operations, or liquidity.

**3. Acquisitions and Divestitures**

During fiscal 2007, we acquired eleven businesses. Ourmajor acquisitions were (a) the first fiscal quarter purchase of the remaining50% share of our joint venture in UAP Timberland LLC (“Timberland”), (b)  the third fiscal quarter purchase of TerralAgriServices, Inc. and certain assets of Terral FarmService, Inc. and WisnerElevator, Inc. (collectively, “Terral”) , and (c) the fourth fiscal quarterpurchase of  certain retail and serviceassets of AGSCO, Inc. and AG Depot, Inc., and certain retail distributionassets of Boettcher Enterprises.  Thetotal initial purchase price of these acquisitions was $70.1 million. We alsoacquired seven retail distribution locations from independent retaildistributors for an initial purchase price of $12.0 million.

In the thirteen weeks ended May 26, 2006, we paid$13.6 million of purchase price for acquisitions, net of cash received, andassumed liabilities of $12.0 million. There were no acquisitions in the thirteen weeks ended May 27,2007.  However, we paid an additional$4.3 million in the thirteen weeks ended May 27, 2007 for certain items relatedto fiscal 2007 acquisitions.  Although weare still finalizing our purchase accounting for several of the acquisitionscompleted in fiscal 2007, any future adjustment to the purchase priceallocations of these acquisitions is expected to be immaterial.

**4. Royalties, Service Charges andOther (Income) and Expenses**

Royalties, service charges and other (income) andexpenses consist of the following:

|                                                                                                   | ** ** | **Thirteen Weeks Ended** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| **Royalties, service charges and other (income) and expenses** | ** ** | **May 27, 2007**         | ** ** | **May 28, 2006** | ** ** |
| ** **                                                                                        | ** ** | **(in thousands)**            | ** ** |
| Royalty income                                                                                    |       | $                                  | (3,729     | ) | $ | (3,210 | ) |
| Service charges  income                                                                           |       | (2,749                             | )          | (1,842 | ) |
| Commission  income                                                                                |       | (882                               | )          | (761 | ) |
| Currency  translation gain                                                                        |       | (817                               | )          | (148 | ) |
| Gain on sale of  leased assets                                                                    |       | (604                               | )          | (978 | ) |
| Miscellaneous  income                                                                             |       | (517                               | )          | (409 | ) |
| **Total**                                                                                         | ** ** | **$**                              | **(9,298** | **)** | **$** | **(7,348** | **)** |

**5. Certain Asset Accounts**

***Receivables andAllowance for Doubtful Accounts.***Our receivables includereceivables from customers net of allowances for doubtful accounts, vendorrebates receivable, and miscellaneous receivables. At May 27,2007, February 25, 2007, and May 28, 2006, the net receivables fromcustomers were $1,100.5 million, $273.4 million, and $955.4 million,respectively, vendor rebates receivable were $167.2 million, $47.4 million, and$158.4 million, respectively, and miscellaneous receivables were $13.2 million,$17.4 million, and $17.7 million, respectively. At May 27, 2007, February25, 2007, and May 28, 2006, the allowance for doubtful accounts totaled$20.8 million, $15.7 million, and $14.6 million, respectively.

***Inventory andInventory Reserves.***Inventory consists primarily ofchemicals, fertilizer, and seed products purchased from our suppliers orproduced by one of our three formulation facilities, for resale to ourcustomers. We record inventory at the lower of cost or market. We maintain aperpetual inventory system, which we reconcile to physical counts at eachlocation periodically.

Each fiscal quarter, we analyze our inventory againsthistorical sales of inventory products to determine which SKU items may beobsolete or slow-moving. A reserve is then established based on this analysis.The reserve is intended to reflect the difference between our cost and netrealizable value of inventory. Our reserves for slow-moving and obsoleteinventory items were $8.9 million, $7.1 million, and $5.7 million at May27, 2007, February 25, 2007, and May 28, 2006, respectively.

Inventories are comprised of the following:
| **Inventory**                      | ** ** | **May 27, 2007** | ** **  | **February 25, 2007** | ** ** | **May 28, 2006** | ** ** |
|------------------------------------|------------|----------------------------|-------------|---------------------------------|------------|----------------------------|------------|
| ** **                         | ** ** | **(in thousands)**    | ** **  |
| Raw materials  and work in process |       | $                          | 16,868      |                            | $          | 18,129                     |       | $ | 11,768 |   |
| Finished goods                     |       | 776,881                    |        | 864,904                         |       | 702,447                    |       |
| **Total**                          | ** ** | **$**                      | **793,749** | ** **                      | **$**      | **883,033**                | ** ** | **$** | **714,215** | ** ** |

*** ***

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***Goodwill.***Goodwill represents the excess of the purchase price paid over the fair valueof the net assets acquired in business acquisitions plus acquisition costs.Goodwill is not amortized. In accordance with SFAS No. 142, “Goodwill andOther Intangible Assets,” we test goodwill for impairment annually and wheneverevents or changes in circumstances indicate that the carrying amount may not befully recoverable. We completed our latest goodwill impairment test atNovember 26, 2006, and determined that there was no impairment at thatdate. We may be subject to earnings volatility if goodwill impairment occurs ata future date. At May 27, 2007, February 25, 2007, and May 28, 2006,goodwill totaled $45.6 million, $45.1 million, and $35.6 million, respectively.

***Debt Issuance Costs***.Our debt issuance costs net of amortization were $5.1 million, $5.4 million,and $16.0 million at May 27, 2007, February 25, 2007, and May 28, 2006, respectively. In June2006, we wrote off $16.0 million of debt issuance costs related to our previousdebt instruments at the time they were paid off. Our debt issuance costs at May27, 2007, consist of costs related to replacing our credit facility andestablishing a new senior secured credit facility. Our debt issuance costs atMay 28, 2006, consisted of costs associated with United Agri Products’revolving credit facility, United Agri Products’ 8 1/4% Senior Notes due 2011 (the “8 1/4% Senior Notes”), and our 10 3/4%Senior Discount Notes due 2012 (the “10 3/4%Senior Discount Notes”). Deferred debt issue costs are being amortized on astraight-line basis, which approximates the effective interest method, over theterms of the related debt. The related amortization is recognized as interestexpense and other amortization expense.

**6. Hedging Activities**

***DerivativeInstruments.***In July 2006, in compliance with the termsof our new credit facility, we entered into two interest rate swaps to manageexposure to changes in cash flows related to changes in the variable interestrate on a portion of our long-term debt. Under the terms of the swaps, we pay adesignated fixed rate and receive a variable rate which is based on LIBOR. Therate received is expected to offset the variable rate to be paid on the longterm debt which is also based on LIBOR.

At May 27, 2007, the notional value of the interestrate swaps was $165 million. The notional values of these amortizing swaps willdecline to $90 million prior to expiration in July 2011. The fair value of theinterest rate swaps at May 27, 2007, was ($1.7) million and is classified as “Othernon-current liabilities” on the balance sheet. The mark-to-market loss, net oftaxes, deferred in other comprehensive income at May 27, 2007, is $1.1 million.  During the thirteen weeks ended May 27,2007, the critical terms of the hedge and the hedged items did not change andthere has been no adverse change in the risk of default by counterparties tothe swap since inception. As a result, no gain or loss has been recognized dueto hedge ineffectiveness.

**7. Stock-Based Compensation**

Our stock-based compensation programs includenon-qualified stock options, restricted stock units, and deferred compensation.At May 27, 2007, our stock compensation programs were in accordance with theequity compensation plans maintained by the company: the 2004 Long-TermIncentive Plan (the “2004 LTIP”), the 2003 Stock Option Plan (the “2003 Plan”),the 2004 Non-Executive Director Stock Option Plan (the “Director Option Plan”),and the Director Deferred Compensation Plan (the “Director DCP”).

The following table summarizes the outstandingoptions, including the related activity in the thirteen weeks ended May 27,2007:
| **Stock Options**                                                       | ** ** | **Shares Subject  to Option** | ** ** | **Weighted-  Average Exercise  Price Per Share** | ** ** |
|-------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------------------------------|------------|
| Balance at  February 25, 2007 (2,161,639 shares vested and exercisable) |       | 2,511,278                               |       | $                                                               | 2.56       |   |
| Granted                                                                 |       | —                                  |       | $                                                               | —     |   |
| Exercised                                                               |       | (212,758                                | )          | $                                                               | 2.56       |   |
| Forfeited                                                               |       | —                                  |       | $                                                               | —     |   |
| **Balance at May 27, 2007  (1,958,770 shares vested and exercisable)**  | ** ** | **2,298,520**                           | ** ** | **$**                                                           | **2.56**   | ** ** |

At May 27, 2007, there was $0.1 million ofunrecognized compensation cost related to unvested stock options. Theweighted-average remaining contractual life at May 27, 2007 was 4.5 years, forboth outstanding and exercisable options.

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In the thirteen weeks ended May 27, 2007, and May 26,2006, 717,620 and 510,500 shares of restricted stock, respectively, weregranted, at the weighted-average fair market value of $25.70 per share and$20.81 per share, respectively.

Compensation expense is recognized over the vestingperiods of the awards.  The recordedamounts for the thirteen weeks ended May 27, 2007, and May 28, 2006, all ofwhich primarily relates to restricted stock, was $2.0 million and $1.0 million,respectively.

At May 27, 2007, there was approximately $24.5million of unrecognized compensation expense, before taxes and net of estimatedforfeitures, related to restricted stock unit grants, which will be recognizedover a weighted average period of 3.4 years.

**8. Income Taxes**

We adopted FIN No. 48 on February 26, 2007. This interpretation prescribes a recognitionthreshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return.This interpretation also provides guidance on subsequent adjustment of recordedamounts, classification of interest and penalties, accounting in interimperiods, disclosure, and transition.  Referto “Adoption of New Accounting Pronouncement” in Note 2 for the discussionregarding the cumulative effect of adopting FIN No. 48.

**9. Debt**

In June 2006, our wholly owned subsidiary, United AgriProducts, Inc. replaced both its revolving credit facility and senior notes andentered into a new senior secured credit facility. The new senior securedcredit facility provides for (a) a new six-year $175 million term loanfacility and, (b) a five-year senior secured asset based revolving creditfacility in an aggregate principal amount of $675 million, including $50million for letters-of-credit (jointly referred to hereafter as “the new creditfacility,” or the “senior secured credit facility”). Availability of therevolving credit facility is subject to a borrowing base formula, whichincludes availability of an over-advance during certain periods. The new creditfacility provides that interest rates are based on, at United Agri Products,Inc.’s option, (a) LIBOR plus the applicable margin or (b) the baserate, which will be the higher of (i) the rate publicly quoted by the WallStreet Journal as the “base rate on corporate loans posted by at least 75% ofthe nation’s 30 largest banks” or (ii) the Federal Funds rate plus 0.50%,plus the 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 forthe revolving facility is 1.25% for LIBOR advances and 0.00% for base rateadvances. The revolving facility is secured by a first-priority lien on allaccounts, inventory, general intangibles related to accounts and inventory, andall proceeds of the foregoing (“Current Asset Collateral”) of UAP Holding Corp.and its subsidiaries, and a second priority lien (subject to certain exclusionsand exceptions) on other assets and proceeds of such other assets. The termfacility is secured by a first-priority lien (subject to certain exclusions andexceptions) in all assets of UAP Holding Corp. and its subsidiaries, and allproceeds thereof other than the Current Asset Collateral, and a second-prioritylien in the Current Asset Collateral.

In June 2006, UAP Holding Corp. and United AgriProducts, Inc. consummated the tender offers and consent solicitations for the 103¤4%Senior Discount Notes due 2012 issued by UAP Holding Corp. and the 81¤4%Senior Notes due 2011 issued by United Agri Products, Inc. (collectively, the “SeniorNotes”). The companies accepted for purchase $123.1 million principal amount atmaturity of the 103¤4% SeniorDiscount Notes (representing 98.5% of the previously outstanding 103¤4%Senior Discount Notes) and $203.5 million principal amount of the 81¤4%Senior Notes representing approximately 99.9% of the previously outstanding 81¤4%Senior Notes. Total consideration paid for the notes tendered plus accruedinterest thereon was $120.6 million for the 103¤4%Senior Discount Notes and $227.2 million for the 81¤4%Senior Notes. These payments and related expenses were financed throughborrowings under the new senior secured credit facility.

Subsequently, UAP Holding Corp. repurchased inbrokered market transactions all of the $1.9 million principal amount atmaturity of its 103¤4% SeniorDiscount Notes due 2012 that had remained outstanding following the closing onJune 1, 2006 of the tender offer and consent solicitation. Accordingly,all of the 103¤4% SeniorDiscount Notes previously issued and authenticated under the indenture dated asof January 26, 2004, as supplemented (the “Indenture”), between UAPHolding Corp. and The Bank of New York (formerly JPMorgan Chase Bank, N.A.), astrustee (the “Trustee”), had been delivered by UAP Holding Corp. to the Trusteeand cancelled. In accordance with Section 11.01 of the Indenture, UAPHolding Corp. satisfied and discharged the Indenture, which satisfaction anddischarge was acknowledged by the Trustee on November 24, 2006. Uponsatisfaction and discharge, the Indenture ceased to be of further effect(except for certain rights of the Trustee).

At May 27, 2007, there was $675.0 million oftotal borrowing capacity under the revolving credit facility and United AgriProducts had aggregate borrowing availability thereunder of $348.1 million(after giving effect to $311.5 million of revolving loans and $15.4 million ofletters of credit under the sub-facility).

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At May 27, 2007, we believe that the permitteddistributions available to pay dividends under the restricted payment covenantof the senior secured credit facility would be approximately $105.6 millionbefore giving effect to the June 1, 2007 dividend payment of $11.6million.

Our weighted average interest rate on short termborrowings outstanding at May 27, 2007, was 6.6%.

Our senior secured credit facility contains certaincustomary representations, warranties, and affirmative covenants. AtMay 27, 2007, we were in compliance with all covenants under our seniorsecured credit facility.

Total current and long-term debt at May 27,2007, February 25, 2007, and May 28, 2006, consisted of the following:
| **Debt**                                                      | ** ** | **May 27, 2007** | ** **  | **February 25, 2007** | ** ** | **May 28, 2006** | ** ** |
|---------------------------------------------------------------|------------|----------------------------|-------------|---------------------------------|------------|----------------------------|------------|
| ** **                                                    | ** ** | **(in thousands)**    | ** **  |
| **Total  debt**                                               |       |                       |        |                            |       |                       |       |
| Senior Secured Asset Based Revolving Credit Facility          |       | $                          | 311,528     |                            | $          | 182,989                    |       | $ | — |   |
| Term Loan Facility                                            |       | 173,688                    |        | 174,125                         |       | —                     |       |
| 8 1/4%  Senior Notes                                     |       | 15                         |        | 15                              |       | 203,500                    |       |
| 10 3/4%  Senior Discount Notes, at accreted value        |       | —                     |        | —                          |       | 105,631                    |       |
| **Total debt**                                                | ** ** | **485,231**                | ** **  | **357,129**                     | ** ** | **309,131**                | ** ** |
| **Less:  current portion**                                    |       |                       |        |                            |       |                       |       |
| Senior Secured Asset Based Revolving Credit Facility          |       | $                          | 311,528     |                            | $          | 182,989                    |       | $ | — |   |
| Term Loan Facility                                            |       | 1,750                      |        | 1,750                           |       | —                     |       |
| Senior notes to be refinanced with revolving credit  facility |       | —                     |        | —                          |       | 133,784                    |       |
| **Total  long-term debt**                                     | ** ** | **$**                      | **171,953** | ** **                      | **$**      | **172,390**                | ** ** | **$** | **175,347** | ** ** |

Maturities of debt in the remainder of fiscal 2008 andeach of the five subsequent years are as follows:

| Fiscal Year Ending  | ** ** | **At May 27, 2007** | ** **  |
|------------------------------------|------------|------------------------------------|-------------|
| ** **                         | ** ** | **(in thousands)**            | ** **  |
| 2008                               |       | $                                  | 313,293     |   |
| 2009                               |       | 1,750                              |        |
| 2010                               |       | 1,750                              |        |
| 2011                               |       | 1,750                              |        |
| 2012                               |       | 1,750                              |        |
| 2013 and  thereafter               |       | 164,938                            |        |
| **Total**                          | ** ** | **$**                              | **485,231** | ** ** |

**10. Incentive-Based Compensation Plan**

We have an incentive-based compensation plans forofficers and key employees.  Factorsconsidered in the plans include growth, profitability, individual performanceof each operating center, and key performance metrics, including overallcompany operating performance. Amounts charged to expense totaled $13.7 millionand $11.7 million in the thirteen weeks ended May 27, 2007, and May 28, 2006,respectively.

**11. Dividends**

On March 1, 2007, we paid an $0.1875 per sharedividend.

On April 25, 2007, our board of directorsdeclared a quarterly dividend on our common stock in the amount of $0.225 pershare of common stock. We paid this dividend on June 1, 2007, to shareholders ofrecord at May 15, 2007.

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**12. Business Segment and RelatedInformation**

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

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

|                    | ** ** | **Thirteen Weeks Ended** | ** **    |
|--------------------|------------|------------------------------------|---------------|
| **Net sales** | ** ** | **May 27, 2007**         | ** **    | **May 28, 2006** | ** ** |
| ** **         | ** ** | **(in thousands)**            | ** **    |
| United States      |       | $                                  | 1,577,020     |   | $ | 1,371,383 |   |
| Canada             |       | 27,998                             |          | 26,640 |   |
| **Total**          | ** ** | **$**                              | **1,605,018** | ** ** | **$** | **1,398,023** | ** ** |

 
| **Long-lived assets** | ** ** | **May 27, 2007** | ** **  | **February 25, 2007** | ** ** | **May 28, 2006** | ** ** |
|----------------------------|------------|----------------------------|-------------|---------------------------------|------------|----------------------------|------------|
| ** **                 | ** ** | **(in thousands)**    | ** **  |
| United States              |       | $                          | 221,222     |                            | $          | 216,238                    |       | $ | 180,061 |   |
| Canada                     |       | 1,220                      |        | 887                             |       | 562                        |       |
| **Total**                  | ** ** | **$**                      | **222,442** | ** **                      | **$**      | **217,125**                | ** ** | **$** | **180,623** | ** ** |

Long-lived assets consist of property, plant andequipment, net of depreciation, goodwill, indefinite life and amortizableintangibles, and other assets. Long-lived assets by geographical area are basedon the location of facilities.

Net sales by product category are as follows:

|                                                       | ** ** | **Thirteen Weeks Ended** | ** **    |
|-------------------------------------------------------|------------|------------------------------------|---------------|
| **Net sales by product category** | ** ** | **May 27, 2007**         | ** **    | **May 28, 2006** | ** ** |
| ** **                                            | ** ** | **(in thousands)**            | ** **    |
| Chemicals                                             |       | $                                  | 732,034       |   | $ | 713,949 |   |
| Fertilizer                                            |       | 480,127                            |          | 334,330 |   |
| Seed                                                  |       | 357,577                            |          | 321,615 |   |
| Other                                                 |       | 35,280                             |          | 28,129 |   |
| **Total**                                             | ** ** | **$**                              | **1,605,018** | ** ** | **$** | **1,398,023** | ** ** |

**13. Related Party Transactions**

In March 2006, certain funds affiliated with ApolloManagement V, L.P., a major stockholder of UAP Holding Corp., and current andformer employees, including certain members of our management sold 9,322,858 ofUAP Holding Corp.’s common shares in a secondary offering pursuant to a shelfregistration statement. The sale, from which UAP Holding Corp. received noproceeds, represented approximately 18.5% of the current shares outstanding.Immediately following this sale, Apollo beneficially owned approximately 17% ofUAP Holding Corp.’s outstanding common stock and our management team’sbeneficial ownership of UAP Holding Corp., including vested options, decreasedto approximately 6.0%.

In November 2006, certain funds affiliated with ApolloManagement V, L.P., and current and former employees, including certain membersof our management sold an additional 9,322,857 of UAP Holding Corp.’s commonshares in a secondary offering pursuant to a shelf registration statement. Thesale, from which UAP Holding Corp. received no proceeds, representedapproximately 18.3% of the current shares outstanding. Immediately followingthis sale, Apollo no longer beneficially owned any of UAP Holding Corp.’soutstanding common stock and our management team’s beneficial ownership of UAPHolding Corp., including vested options, decreased to approximately 4.4%.

**14. Commitments and Contingencies**

As part of our ongoing operations, we enter intoarrangements that obligate us to make future payments under contracts such aslease agreements, debt agreements, and unconditional purchase obligations(i.e., obligations to transfer funds in the future for fixed or minimumquantities of goods or services at fixed or minimum prices, such as “take-or-pay”contracts). We enter into unconditional purchase obligation arrangements in thenormal course of business to ensure that adequate levels of sourced product areavailable to us.

Tax contingencies are provided for under FIN No. 48.See Note 2 and Note 8.

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We are a party to a number of lawsuits and claimsarising out of the operation of our businesses. Our management believes theultimate resolution of such matters should not have a material adverse effecton our our business, financial condition, cash flow, results of operations, orliquidity.

In some cases, pursuant to indemnity agreements, thirdparties (including government reimbursement funds and insurers) may contributeto the costs of cleanup at certain sites. Pursuant to the asset purchase agreementdated November 24, 2003, in which ConAgra sold United Agri Products and itsrelated businesses to UAP Holding Corp., ConAgra has agreed to provide us witha partial reimbursement of costs that we may incur relating to any cleanuprequirements due to environmental conditions at our Greenville, Mississippifacility prior to our purchase of the site from them in November 2003. Additionally,on October 14, 2002, December 23, 2002, and December 31,2002, three separate lawsuits were filed in the Circuit Court of WashingtonCounty, Mississippi against our subsidiary, Platte Chemical Company (“Platte”),and certain former employees of Platte, relating to alleged releases fromPlatte’s Greenville, Mississippi facility. The plaintiffs in such suits areseeking compensation for alleged personal injury and property damage. Inconnection with the Acquisition, ConAgra agreed to partially reimburse us,subject to a cap, for fees and expenses we incur in connection with suchlawsuits. Subsequent to November 23, 2003, another lawsuit not covered bythe ConAgra cost sharing agreement was filed in the Circuit Court of WashingtonCounty, Mississippi against us, which lawsuit relates to the same allegedreleases from the Greenville, Mississippi facility. While discovery in theGreenville litigations is not yet complete, based on information available tous at this time we do not believe that such litigations, if adverselydetermined, would have a material adverse effect on our business, financialcondition, cash flow, results of operations, and liquidity.

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**ITEM 2.****                              MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

*Unless the context requiresotherwise, all references to “Company,” “we,” “us,” “ours,” and “UAP” referspecifically to UAP Holding Corp. and its consolidated subsidiaries.Additionally, all references to “United Agri Products” refer specifically onlyto United Agri Products, Inc., and its subsidiaries, and all references to “UnitedAgri Products, Inc.” refer specifically to United Agri Products, Inc.,excluding its subsidiaries.*

*We intend for this Management’sDiscussion and Analysis of Financial Condition and Results of Operations (“MD&A”)to provide the reader with information that will assist in understanding ourbusiness, financial condition, cash flow, results of operations, or liquidityfor the periods presented. You should read this MD&A in conjunction withour consolidated financial statements and the accompanying notes theretoappearing elsewhere in this report. The results of operations for the thirteenweeks ended May 27, 2007, are not necessarily indicative of the results tobe expected for other interim periods or for the full fiscal year. This sectionshould also be read in conjunction with our Annual Report on Form 10-K forthe fiscal year ended February 25, 2007.*

*We operate on a 52- or 53-weekfiscal year. Fiscal years are identified in this report according to thecalendar year in which they ended. The fifty-two weeks ended February 24,2008, will be referred to as “fiscal 2008,”and the fifty-two weeks endedFebruary 25, 2007, will be referred to as “fiscal 2007.”*

*In addition, the statements in thediscussion and analysis regarding industry outlook, our expectations regardingthe performance of our business, our liquidity and capital resources, and theother non-historical statements in the discussion and analysis are forward-lookingstatements. See “Forward-Looking Statements.”*

**Our Business**

We are the largest independent distributor ofagricultural inputs and professional non-crop products in the United States andCanada. Our customers include farmers, commercial growers, regional dealers,and consumers in the professional non-crop market.

We market a comprehensive line of products, includingchemicals, fertilizer, and seed manufactured and/or marketed by the world’sleading agricultural input companies, including BASF, Bayer, ConAgraInternational Fertilizer Company, Dow AgroSciences, DuPont, Monsanto, andSyngenta. In addition to our product offering, we provide a broad array ofvalue-added services including crop management, biotechnology advisoryservices, custom fertilizer blending, seed treatment, inventory management, andcustom applications of crop inputs. The products and services we offer arecritical to our customers because they lower the overall cost of cropproduction and improve crop quality and yield.

Our operations entail a network of approximately 370sales and distribution facilities and three formulation plants strategicallylocated in major crop-producing areas of the United States and Canada. Ourbusiness is highly seasonal based upon the planting, growing, and harvestingcycles of our customers’ operations. As a result of this seasonality, weexperience significant fluctuations in our revenues, net income, and networking capital levels throughout our fiscal year.  During the last three years, because of thecondensed nature of the planting season, more than 75% of our net salesoccurred during the first and second fiscal quarters of each year.  Weather conditions and changes in the mix ofcrops planted can also cause quarterly results to vary.

**Fiscal 2007 Acquisitions**

One of our key initiatives is to grow our retailbusiness by leveraging our size and leading market share across North America.We study our market share by state, county, and customer, and develop salesinitiatives at local and regional levels to address any gaps and opportunitieswe have in our distribution network for chemicals, fertilizer, and seed. Whereour data indicates an opportunity, we have the potential to add sales personneland/or locations and assets, or acquire businesses to fill gaps in ourcoverage.

During fiscal 2007, we completed eleven acquisitions,including the following:

·                  During the firstfiscal quarter of 2007, we purchased the remaining 50% share of our jointventure in UAP Timberland and we acquired a retail distribution location froman independent retail distributor.

·                  During the thirdfiscal quarter of 2007, we acquired Terral AgriServices, Inc. and certain assetsof Terral FarmService, Inc. and Wisner Elevator, Inc. (collectively, “Terral”).In addition to the Terral acquisition, we acquired three retail distributionlocations from independent retail distributors.

·                  During thefourth fiscal quarter of 2007, we acquired certain retail and service assets ofAGSCO, Inc. and AG Depot, Inc. In addition, we acquired certain retaildistribution assets of Boettcher Enterprises, and three retail distributionlocations from independent retail distributors.

For these acquisitions, we paid $82.1 million infiscal 2007 and an additional $4.3 million in fiscal 2008. There were noacquisitions in the thirteen weeks ended May 27, 2007.

We will continue to analyze and pursue additionalacquisition candidates as appropriate opportunities arise.

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**Other Factors Impacting Our Results**

According to the June 29, 2007 “Acreage and GrainStocks” report published by the National Agricultural Statistics Service of theUSDA, the 2007 planted corn acreage of 92.9 million acres increased19 percent from the 78.3 million acres planted in 2006. In contrast,soybean acres were down 15 percent from the record high acres planted in2006 and planted cotton acres were the lowest since 1989, down 28 percentfrom 2006.  Our fiscal 2008 first quarterresults reflect this shift in our customers’ acreage of specific crops. The impact of higher corn production, primarily resulting from increased demandassociated with ethanol production, is reflected in increased fertilizer salesfor the first fiscal quarter of 2008.  Our operations in the Midwestportions of the United States are experiencing the most significant salesincreases from increased corn acreage.  However, the decrease in bothsoybean and cotton planted acres for fiscal 2008 have resulted in lower sales frominputs on those crops.   Our operations, particularly in the Southernportion of the United States, will experience lower input sales due to lowerplanted acreage of cotton, as cotton requires more intensive inputs than corncrops.  The impact of these fluctuations in planted acres on theagricultural distribution industry and other industries (such as livestockproduction, fertilizer manufacturing, textiles, and food processing) on theremainder of fiscal 2008 and future years is difficult to predict and willcontinue to evolve over time.

**RESULTS OF OPERATIONS**

**Analysis of Consolidated Statementsof Earnings**

|                                                             | ** ** | **Thirteen Weeks Ended**                        | ** ** | ** **             | ** ** |
|-------------------------------------------------------------|------------|-----------------------------------------------------------|------------|------------------------|------------|
| ** **                                                  | ** ** | **May 27,  2007**                                    | ** ** | **May 28,  2006** | ** ** | **Percent  Change** | ** ** |
| ** **                                                  | ** ** | **(in thousands, except share data**) | ** ** |
| Net sales                                                   |       | $                                                         | 1,605,018  |                   | $          | 1,398,023 |   | 14.8 | % |
| Cost of goods  sold                                         |       | 1,365,017                                                 |       | 1,212,374              |       | 12.6 | % |
| Gross profit                                                |       | 240,001                                                   |       | 185,649                |       | 29.3 | % |
| Selling, general  and administrative expenses               |       | 98,973                                                    |       | 88,974                 |       | 11.2 | % |
| Royalties,  service charges and other (income) and expenses |       | (9,298                                                    | )          | (7,348                 | )          | 26.5 | % |
| Operating income                                            |       | 150,326                                                   |       | 104,023                |       | 44.5 | % |
| Interest expense                                            |       | 7,996                                                     |       | 8,289                  |       | (3.5 | %) |
| Finance related  and other charges                          |       | —                                                    |       | 482                    |       | NM |   |
| Income before income taxes                                  |       | 142,330                                                   |       | 95,252                 |       | 49.4 | % |
| Income tax  expense                                         |       | 54,647                                                    |       | 36,936                 |       | 48.0 | % |
| Net income                                                  |       | $                                                         | 87,683     |                   | $          | 58,316 |   | 50.4 | % |
| Earnings per  share:                                        |       |                                                      |       |                   |       |   |   |
| Basic                                                       |       | $                                                         | 1.71       |                   | $          | 1.15 |   | 48.7 | % |
| Diluted                                                     |       | $                                                         | 1.66       |                   | $          | 1.11 |   | 50.0 | % |
| Effective tax  rate                                         |       | 38.4                                                      | %          | 38.8                   | %          |   |   |
| Comparison as a  Percent of Net Sales:                      |       |                                                      |       |                   |       |   |   |
| Gross margin                                                |       | 15.0                                                      | %          | 13.3                   | %          |   |   |
| Selling, general  and administrative expenses               |       | 6.2                                                       | %          | 6.4                    | %          |   |   |
| Operating income                                            |       | 9.4                                                       | %          | 7.4                    | %          |   |   |
| Income before  income taxes                                 |       | 8.9                                                       | %          | 6.8                    | %          |   |   |
| Net income                                                  |       | 5.5                                                       | %          | 4.2                    | %          |   |   |
| NM = Not Meaningful                                         |       |                                                      |       |                   |       |   |   |

** **

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**Thirteen Weeks Ended May 27, 2007,Compared to Thirteen Weeks Ended May 28, 2006**

***Net Sales.***Salesincreased 14.8% to $1,605.0 million in the thirteen weeks ended May 27, 2007,compared to $1,398.0 million for the thirteen weeks ended May 28, 2006.

Sales of chemicals increased to $732.0 million in thethirteen weeks ended May 27, 2007, from $713.9 million in the thirteen weeksended May 28, 2006. Acquired businesses contributed approximately $50 millionof retail chemicals sales, some of which was offset by lost wholesale sales assome of our acquisitions were former wholesale customers.  Sales of herbicides increased from last year,primarily due to acquisitions and increased sales of glyphosate herbicides as aresult of increased adoption of glyphosate tolerant corn.   Insecticide sales decreased due to theadoption of insect resistant corn seed to protect from corn rootworm, resultingin less insecticides used at planting time. Fungicide sales increased as moreapplications for general plant health took place.

Sales of fertilizer increased to $480.1 million in thethirteen weeks ended May 27, 2007, from $334.3 million in the thirteenweeks ended May 28, 2006.  Acquiredbusinesses contributed approximately $30 million of the increase.  Aside from acquisition activity, increases involumes sold and an improvement in per ton selling prices drove the remainderof the difference.  Volume and pricegrowth were due to increased grower demand, mainly as growers switched theirplanted acreage to corn from soybeans in the Midwest, and needed to replenishnutrients in the soil.  Volumes were alsodriven by application timing.  Fertilizeris typically applied either in the fall or spring seasons, depending on weatherand fertilizer prices. Our experience in our third and fourth quarters offiscal 2007 led us to believe that growers delayed fertilizer applications inthe fall and winter months, thereby driving increased applications in our firstquarter of fiscal 2008.

Sales of seed increased to $357.6 million in thethirteen weeks ended May 27, 2007, from $321.6 million in the thirteen weeksended May 28, 2006. Acquired businesses represented approximately $28 millionof the increase.  The remaining increase wasdue to volume growth in third party and proprietary brands of corn seed andhigher prices due to increased corn acres and increased sales of seed withenhanced traits.  Sales of cotton andsoybean seed decreased due to reductions in the planted acreage of those crops.

Sales of proprietary chemical and seed products were17.2% of total chemical and seed sales in the thirteen weeks ended May 27,2007, compared to 15.3% in the thirteen weeks ended May 28, 2006.

Other sales increased to $35.3 million in the thirteenweeks ended May 27, 2007, from $28.1 million in the thirteen weeks ended May28, 2006, due to acquired businesses, increased application fees, andadditional transportation and warehousing revenue.

***Cost of Goods Sold.***Cost of goods sold was $1,365.0 million in the thirteenweeks ended May 27, 2007, compared to $1,212.4 million in the thirteen weeksended May 28, 2006. Gross profit was $240.0 million in the thirteen weeks endedMay 27, 2007, compared to $185.6 million in the thirteen weeks ended May 28,2006. Gross margin (gross profit as a percentage of net sales) was 15.0% in thethirteen weeks ended May 27, 2007, compared to 13.3% in the thirteen weeksended May 28, 2006. The increase in gross profit dollars was primarily dueto higher fertilizer volumes, better unit profits on fertilizer, and the effectof acquired businesses.  Higher sales ofcorn seed and better unit margins across our seed business also contributed. Grossprofits on chemicals increased due to increased sales of proprietary productsas well as better margins on these products.

***Selling, Generaland Administrative Expenses.***Selling, general andadministrative expenses increased to $99.0 million (6.2% of sales) in thethirteen weeks ended May 27, 2007, from $89.0 million (6.4% of sales) in thethirteen weeks ended May 28, 2006. The increase in expenses was due to theadditional expenses brought on by our acquired businesses, lower recoveries of accountspreviously written off, higher incentive-based compensation commensurate withthe Company’s performance, and the lack of the insurance refund we received inthe thirteen weeks ended May 28, 2006.

***Royalties, ServiceCharges and Other Income and Expenses.***These itemsinclude royalty income generated by our proprietary products group, servicecharge income paid by customers who do business with us on terms, as well asother items. Other income increased to $9.3 million in the thirteen weeks endedMay 27, 2007, up from $7.3 million in the thirteen weeks ended May 28, 2006,primarily due to higher customer service charge income associated with highersales.

***Interest Expense,Net.***Interest expense decreased to $8.0 million in thethirteen weeks ended May 27, 2007, compared to $8.3 million in the thirteenweeks ended May 28, 2006. The decrease was due to higher interest incomeassociated with income tax refunds, and lower debt issuance cost amortization,partially offset by increased short term borrowings related to our acquisitionactivity and increased working capital needs.

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***Finance Related andOther Charges.***We had no finance and related othercharges during the thirteen weeks ended May 27, 2007.  Finance related and other charges in thethirteen weeks ended May 28, 2006, were $0.5 million related to therefinancing of our long-term debt, which was completed during the secondquarter of fiscal 2007, and a secondary offering of our common stock that wascompleted on March 9, 2006.

**LIQUIDITY AND CAPITAL RESOURCES**

**Overview**

Our ongoing operations require availability of fundsto service debt, fund working capital, and meet capital expenditurerequirements. We currently finance and expect to continue to finance theseactivities through cash flows from operations and from amounts available underour revolving credit facility.

**Operating Activities**

Cash flows used for operating activities totaled$118.1 million in the thirteen weeks ended May 27, 2007, compared to $41.9million in the thirteen weeks ended May 28, 2006. Operating cash flows wereimpacted by increased accounts receivables which were only partially offset bydecreased inventory, increased accounts payable, and higher net income.  Accounts receivable increased due to acquiredbusinesses and higher sales activity during the quarter.  Inventory decreased from the end of fiscal2007 primarily due to the higher demand for our product in the planting monthsof the first fiscal quarter.  Accountspayable increased from the end of fiscal 2007, due to higher purchasing levelsassociated with first quarter sales activity.

**Investing Activities**

Cash flows used for investing activities totaled $13.0million in the thirteen weeks ended May 27, 2007, and $12.8 million in thethirteen weeks ended May 28, 2006. Additions to property, plant and equipmentwere $8.8 million in the thirteen weeks ended May 27, 2007, compared to$6.7 million in the thirteen weeks ended May 28, 2006.  Capital spending during the thirteen weeksended May 27, 2007, was for a variety of projects, the largest of whichare two fertilizer expansion projects. No acquisitions of businesses were completed in the first quarter offiscal 2008 compared to $13.6 million spent in the first quarter of fiscal2007.  We did, however, spend $4.3million in the first quarter of fiscal 2008 for additional purchase pricerelated to fiscal 2007 acquisitions. In the first quarter of fiscal 2007, theinvesting cash flows used for the acquisitions were partially offset byproceeds from the sale of assets of $7.5 million.

**Financing Activities**

Cash flows provided by financing activities were$124.9 million in the thirteen weeks ended May 27, 2007, compared to $5.1million in the thirteen weeks ended May 28, 2006. Short term borrowingsincreased due to increased receivables. Cash flows provided by financingactivities reflect a $9.6 million dividend paid to stockholders during thequarter.  Additionally, we activelymanage our cash balances, which results in a check float on zero balanceaccounts. The net change in float (checks not yet presented) was $1.5 millionand $12.9 million in the periods ending May 27, 2007, and May 28, 2006,respectively.

**CreditFacility and Other Long-Term Debt.**

On June 1, 2006, our wholly owned subsidiary,United Agri Products, Inc. refinanced its existing revolving credit facilityand entered into a new senior secured credit facility. The new senior securedcredit facility provides for a new six-year $175 million asset-backed term loanfacility and a five-year senior secured asset backed revolving credit facilityin an aggregate principal amount of $675 million, including $50 million forletters of credit. Availability of the senior secured revolving credit facilityis subject to a borrowing base formula, which includes availability of anover-advance during certain periods. The new senior secured credit facilityprovides that interest rates are based on, at United Agri Products, Inc.’soption, (a) LIBOR plus the applicable margin (described below), or(b) the base rate, which will be the higher of (i) the rate publiclyquoted by The Wall Street Journal as the “base rate on corporate loans postedby at least 75% of the nation’s 30 largest banks” or (ii) the FederalFunds rate plus 0.50%, plus the 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 forthe senior secured revolving facility is 1.25% for LIBOR advances and 0.00% forbase rate advances. The senior secured revolving facility is secured by afirst-priority lien on all accounts, inventory, general intangibles related toaccounts and inventory, and all proceeds of the foregoing (“Current AssetCollateral”) of UAP Holding Corp. and its subsidiaries, and a second prioritylien (subject to certain exclusions and exceptions) on other assets andproceeds of such other assets. The term loan facility is secured by afirst-priority lien (subject to certain exclusions and exceptions) in allassets of UAP Holding 

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Corp. and its subsidiaries, and all proceeds thereofother than the Current Asset Collateral, and a second-priority lien in theCurrent Asset Collateral.

At May 27, 2007, there was $675.0 million oftotal borrowing capacity under the revolving credit facility and United AgriProducts had aggregate borrowing availability thereunder of $348.1 million(after giving effect to $311.5 million of revolving loans and $15.4 million ofletters of credit under the sub-facility).

At May 27, 2007, we believe that the permitteddistributions available to pay dividends under the restricted payment covenantof the senior secured credit facility would be $105.6 million before givingeffect to the June 1, 2007 dividend payment of $11.6 million.

Our weighted average interest rate on short termborrowings outstanding at May 27, 2007, was 6.6%.

Our senior secured credit facility contains certaincustomary representations, warranties, and affirmative covenants. In addition,it contains customary negative covenants restricting our ability to, amongother things:

·                  incur additionalindebtedness;

·                  pay dividends ormake other distributions;

·                  make certaininvestments;

·                  incur liens; and

·                  sell all orsubstantially all of our assets or merge with or into other companies.

Due to the seasonal nature of our business, the amountof borrowings outstanding under the revolving credit facility variessignificantly throughout our fiscal year. During fiscal 2007, short-termborrowings reached a daily peak of $569.2 million on September 25, 2006,while cash on hand at the end of our fiscal periods reached a peak of $35.0million on November 26, 2006. Our average period-end borrowings (net of cash onhand) in the thirteen weeks ended May 27, 2007, were approximately $281.6million.

At May 27, 2007, we were in compliance with allcovenants under our senior secured credit facility.

**Obligations and Commitments**

As part of our ongoing operations, we enter intoarrangements that obligate us to make future payments under contracts such aslease agreements, debt agreements and unconditional purchase obligations (i.e.,obligations to transfer funds in the future for fixed or minimum quantities ofgoods or services at fixed or minimum prices, such as “take-or-pay” contracts).We enter into unconditional purchase obligation arrangements in the normalcourse of business to ensure that adequate levels of sourced product areavailable to us. See Note 14 to the consolidated financial statements.

**Holding Company**

As a holding company, our investments in our operatingsubsidiaries, including United Agri Products, constitute substantially all ofour operating assets. Consequently, our subsidiaries conduct all of ourconsolidated operations and own substantially all of our operating assets. Ourprincipal source of the cash required to pay our and our subsidiaries’obligations is the cash that our subsidiaries generate from their operationsand our borrowings under the senior secured revolving credit facility. Oursubsidiaries are separate and distinct legal entities and have no obligationsto make funds available to us. The terms of the agreements governing ourexisting indebtedness generally restrict our subsidiaries from payingdividends, making loans or other distributions, and otherwise transferringassets to us. Furthermore, our subsidiaries are permitted under the terms ofthe senior secured credit facility to incur additional indebtedness that mayseverely restrict or prohibit the making of distributions, the payment ofdividends, or the making of loans by such subsidiaries to us. We cannot assureyou that the agreements governing our current and future indebtedness willpermit our subsidiaries to provide us with sufficient dividends, distributions,or loans to fund scheduled interest and principal payments on our indebtednesswhen due. If we consummate an acquisition, our debt service requirements couldincrease. We may need to refinance all or a portion of our indebtedness on orbefore maturity. We cannot assure you that we will be able to refinance any ofour indebtedness on commercially reasonable terms or at all.

**Dividend Policy**

We paid an $0.1875 per share dividend on March 1,2007.

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On April 25, 2007, our board of directorsdeclared a quarterly dividend on our common stock in the amount of $0.225 pershare of common stock. The record date for the dividend payment wasMay 15, 2007, and the payment date was June 1, 2007.

There are no assurances that we will declare or payany cash dividends in the future. The declaration and payment of futuredividends to holders of our common stock is at the discretion of our board ofdirectors and depends upon many factors including our financial condition, earnings,legal requirements, restrictions in our debt agreements, and other factors ourboard of directors deems relevant. The terms of our senior secured creditfacility may also restrict us from paying cash dividends on our common stockunder some circumstances. At May 27, 2007, $105.6 million of permitteddistributions were available to pay dividends under our restricted paymentcovenant in our senior secured credit facility before giving effect to theJune 1, 2007 dividend payment of $11.6 million.

In the past, cash flow from our operating activitieshas been highly variable, resulting in negative cash flow during certainperiods. Because of the variability, if our cash flow from operating activitiesis insufficient to fund dividend payments at intended levels, we may need toreduce or eliminate dividends or, to the extent permitted by our debtagreements, fund all or part of the dividends with additional debt or othersources of cash. To the extent we pay dividends, the amount of cash availableto us to pay principal of, and interest on, our outstanding debt will bereduced. Failure to pay the principal or interest on our debt would constitutean event of default under the applicable debt agreements giving the holders ofthe debt the right to accelerate its maturity. If any of our debt isaccelerated, we may not have sufficient cash available to repay it in full andwe may be unable to refinance it on satisfactory terms or at all. An event ofdefault under debt agreements or an acceleration of the debt hereunder couldalso trigger an event of default under other debt agreements. Furthermore, ifwe fund dividends with additional debt, our interest expense will increasewhich may cause a further reduction in the amount of cash available to us.

**Critical Accounting Policies andEstimates**

The process of preparing our consolidated financialstatements in accordance with U.S. generally accepted accounting principles (“GAAP”),requires management to make estimates, judgments, and assumptions that affectthe amounts reported and the accompanying note disclosures. The estimates madeby management are based on historical experience combined with management’sunderstanding of current facts and circumstances. Management identifiescritical accounting estimates as:

·                  those thatrequire the use of assumptions about matters that are inherently and highlyuncertain at the time the estimates are made; and

·                  those for whichchanges in the estimates, judgments, or assumptions, or the use of differentestimates, judgments, and assumptions, could have a material impact on ourconsolidated results of operations or financial condition.

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

·                  Allowance forDoubtful Accounts;

·                  InventoryValuation and Reserves;

·                  Vendor RebateReceivables; and

·                  Income Taxes

For a discussion of the Company’s critical accountingpolicies and estimates, please see our Annual Report on Form 10-K in the yearended February 25, 2007. We have not changed these policies and estimates fromthose previously disclosed.

***Recently Adopted AccountingPronouncements***

See Note 2 to the Consolidated Financial Statementsfor a discussion of the impact of adopting FASB Interpretation No. 48 (FIN No.48), “Accounting for Uncertainty in Income Taxes,” on February 26, 2007.

***Recent AccountingPronouncements.***

In September 2006, the FASB issued Statement ofFinancial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS157”). This standard defines fair value, establishes a framework for measuringfair value in generally accepted accounting principles, and expands disclosuresabout fair value measurements. SFAS 157 is effective for fiscal years beginningafter November 15, 2007, and interim periods within such years. We willadopt SFAS 157 in our first quarter of 

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fiscal 2009, as required. We are currently evaluatingthe new standard. However, the adoption of SFAS 157 is not expected to have amaterial impact on our financial condition, results of operations, or cashflows.

In February 2007, the FASB issued Statement ofFinancial Accounting Standard No. 159, “The Fair Value Option forFinancial Assets and Financial Liabilities” (“SFAS 159”). This statementpermits entities to choose to measure many financial instruments and certainother items at fair value that are not currently required to be measured atfair value. The objective is to improve financial reporting by providingentities with the opportunity to mitigate volatility in reported earningscaused by measuring related assets and liabilities differently without havingto apply complex hedge accounting provisions. This statement requires abusiness entity to report unrealized gains and losses on items for which thefair value option has been elected in earnings at each subsequent reportingdate. An entity may decide whether to elect the fair value option for eacheligible item on its election date, subject to certain requirements describedin the statement. This statement is effective at the beginning of eachreporting entity’s first fiscal year that begins after November 15, 2007.We will adopt SFAS 159 in our first quarter of fiscal 2009, as required. We arecurrently reviewing the requirements of this statement and, at this point intime, we cannot determine the impact, if any, that this statement may have onresults of operations, financial position, or cash flows.

**Forward-Looking Statements**

This report and the documents we have incorporated byreference into this report include “forward-looking statements,” as that termis defined by The Private Securities Litigation Reform Act of 1995 or by theSecurities and Exchange Commission (“SEC”) in its rules, regulations, andreleases that involve risks and uncertainties. Forward-looking statementsinclude statements concerning our plans, objectives, goals, strategies, futureevents, future revenue or performance, capital expenditures, financing needs, plansor intentions relating to acquisitions and divestitures, business trends, andother information that is not historical information, and, in particular,appear under the heading “Management’s Discussion and Analysis of FinancialCondition 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 suchwords or similar expressions are intended to identify forward-lookingstatements. All forward-looking statements are based upon information availableto 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 thatcould cause actual results to differ materially from the results discussed inthe forward-looking statements including, among other things, the mattersdiscussed in this report under this “Item 2. Management’s Discussion andAnalysis of Financial Condition and Results of Operations.” Such risks,uncertainties and other factors may include, among others:

·                  general economicand business conditions;

·                  industry trends;

·                  restrictionscontained in our debt agreements;

·                  our substantialleverage, including the inability to generate the necessary amount of cash toservice our existing debt and the incurrence of substantial indebtedness in thefuture;

·                  the seasonalityof our business and weather conditions;

·                  the possibilityof liability for pollution and other damage that is not covered by insurance orthat exceeds our insurance coverage;

·                  increasedcompetition in the markets in which we operate;

·                  our dependenceon product mix and rebate programs to attain profitability;

·                  our dependenceon a limited number of key executives who we may not be able to adequatelyreplace if they leave our company;

·                  changes ingovernment regulations, agricultural policy, and environmental, health, andsafety laws and regulations;

·                  changes inbusiness strategy, development plans, or cost savings plans;

·                  our ability toreduce working capital and manage expenses;

·                  changes in thenumber of acres planted and the mix of principal crops planted by ourcustomers;

·                  our ability tointegrate newly acquired operations into our existing operations;

·                  the loss of anyof our major suppliers or the bankruptcy or financial distress of ourcustomers;

·                  the ability tomaintain prices and/or attain any price increases for our products;

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·                  availability,terms, and deployment of capital; and

·                  other factorsover which we have little or no control.

These risks and certain other uncertainties arediscussed in more detail in our Annual Report on Form 10-K in the fiscal yearended February 25, 2007, under the caption “Item 1A. Risk Factors.”

There may be other factors, including those discussedelsewhere in this Report, which could cause our actual results to differmaterially from the results referred to in the forward-looking statements. Allforward-looking statements attributable to us or persons acting on our behalfapply only at the date of this Report and are expressly qualified in theirentirety by the cautionary statements included in this Report. We undertake noobligation to publicly update or revise forward-looking statements to reflectevents or circumstances after the date made or to reflect the occurrence ofunanticipated events.

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**ITEM 3.****                               QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

Market risks affecting our business are exposure tochanges in energy prices, fertilizer product prices, interest rates, foreigncurrency exchange rates, and interest rate swaps.

Changes in energy prices have a direct impact on ourfuel costs. These price increases impact our supply chain and selling expenses.Based on our historic usage, an approximate $0.13 increase in the annualaverage per gallon price of fuel would increase our annual fuel expense by $1.0million. Higher fuel prices also affect our customers such that higher expensesfor fuel may reduce the cash or credit available to our customers with whichthey purchase other inputs or services from us.

Our on-hand inventory of fertilizer products has pricerisk related to changes in energy prices and fertilizer global supply anddemand patterns. Our total fertilizer inventories were $95.6 million, $142.9million, and $86.8 million at May 27, 2007, February 25, 2007, and May 28,2006, respectively. Of our total fertilizer inventory, $43.7 million, $74.2million, and $39.8 million at May 27, 2007, February 25, 2007, andMay 28, 2006, respectively, were considered by the fertilizer industry tobe nitrogen based and therefore more sensitive to changes in the price ofnatural gas. Natural gas is the key ingredient in the manufacture of nitrogenbased fertilizer products. While a direct relationship cannot be establisheddue to alternative sources of fertilizer products, such as imports, or substituteproducts, price risk does exist.

Our average daily borrowings under the senior securedrevolving credit facility (net of cash on hand) in the fifty two week periodended May 27, 2007, were approximately $281.6 million. The senior securedrevolving credit facility is affected by changes in interest rates. Based uponthe amount of our average daily borrowings (net of cash on hand) in the fiftytwo week period ended May 27, 2007, a one percentage point change in theassumed weighted average interest rate on such credit facility would change ourannual interest expense by $2.8 million.

Our foreign currency risk is limited primarily to theexchange rate differential in the Canadian and U.S. dollar. The exchange ratewas 0.9261, 0.8626, and 0.9045 at May 27, 2007, February 25, 2007, and May28, 2006, respectively. The exchange rate varied between 0.8455 and 0.9277 inthe thirteen weeks ended May 27, 2007. A one percentage point change in theexchange rate would have approximately a $0.2 million impact on the balancesheet value.

In July 2006, in compliance with the terms of our newcredit facility, we entered into two interest rate swaps to manage exposure tochanges in cash flows related to changes in the variable interest rate on aportion of our long-term debt. Under the terms of the swaps, we pay adesignated fixed rate and receive a variable rate which is based on LIBOR. Therate received is expected to offset the variable rate to be paid on the longterm debt which is also based on LIBOR. At May 27, 2007, the notional value ofthe interest rate swaps was of $165 million. These notional values of theseamortizing swaps will decline to $90 million prior to expiration in July 2011.

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**ITEM 4.****                               CONTROLSAND PROCEDURES.**

At the end of the period covered by this report, weevaluated the effectiveness of the design and operation of our “disclosurecontrols and procedures” as they related to our business (“Disclosure Controls”).This evaluation (“Controls Evaluation”) was done under the supervision and withthe participation of management, including our Chief Executive Officer (“CEO”)and Chief Financial Officer (“CFO”).

Our management, including the CEO and CFO, does notexpect that our Disclosure Controls or our “internal controls over financialreporting” will prevent all errors and all fraud. A control system, no matterhow well conceived and operated, can provide only reasonable, not absolute,assurance that the objectives of the control system are met. Further, thedesign of a control system must reflect the fact that there are resourceconstraints, and the benefits of controls must be considered relative to theircosts. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, have been detected. These inherent limitationsinclude the realities that judgments in decision-making can be faulty, and thatbreakdowns can occur because of simple error or mistake. Additionally, controlscan be circumvented by the individual acts of some persons, by collusion of twoor more people, or by management override of the control. The design of anysystem of controls also is based in part upon certain assumptions about thelikelihood of future events, and there can be no assurance that any design willsucceed in achieving its stated goals under all potential future conditions;over time, controls may become inadequate because of changes in conditions, orthe 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 CFOhave concluded that the Disclosure Controls are effective as of the end of theperiod covered by this report. There have been no significant changes in ourinternal controls or in other factors that could significantly affect internalcontrols subsequent to the date we carried out this evaluation. In addition,there have been no changes in our internal control over financial reportingthat have occurred during the most recent fiscal quarter that have materiallyaffected, or are reasonably likely to materially affect, our internal controlover financial reporting.

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**PARTII. OTHER INFORMATION**

**ITEM 1.****                               LEGALPROCEEDINGS.**

There have been no material changes in our legalproceedings from those disclosed in Part I, Item 1 of our AnnualReport on Form 10-K for the fiscal year ended February 25,2007.

**ITEM 1A.****                      RISKFACTORS.**

There have been no material changes in our riskfactors from those disclosed in Part I, Item 1A of our Annual Report on Form10-K for the fiscal year ended February 25, 2007.

**ITEM 2.****                               UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**

Not applicable

**ITEM 3.****                               DEFAULTSUPON SENIOR SECURITIES.**

Not applicable

**ITEM 4.****                               SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS.**

Not applicable

**ITEM 5.****                               OTHERINFORMATION.**

Not applicable

**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 SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

Date: July 3, 2007
| **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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