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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



---



FORM 10-Q



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



For the quarterly period ended November 27, 2005



OR



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



For the transition period from
 to
.



Commission File Number 000-51035



UAP Holding Corp.

(Exact Name of
Registrant as Specified in Its Charter)



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



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



(970) 356-4400

(Registrants Telephone Number, Including Area Code)



Not applicable

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



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



Yes  x    No ̈



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



Large accelerated filer ̈Accelerated filer  x    Non-accelerated filer ̈



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



Yes ̈No  x



|                                         |  |                               
|---------------------------------------- |  | ------------------------------
|Class                                    |  | Outstanding at January 5, 2006
|Common Stock, par value $0.001 per share |  | 50,477,648 shares             



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1



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##### Table of Contents



TABLE OF CONTENTS



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



2



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PART I. FINANCIAL INFORMATION



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



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



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

Greeley, Colorado



We have reviewed the accompanying condensed consolidated balance sheets of UAP Holding Corp. and subsidiaries (the Company) as
of November 27, 2005 and November 28, 2004, the related condensed consolidated statements of earnings for the 13-week and 39-week periods ended November 27, 2005 and the 13-week and 40-week periods ended November 28, 2004, the
condensed consolidated statements of cash flows for the 39-week period ended November 27, 2005 and the 40-week period ended November 28, 2004, and the condensed consolidated statement of stockholders equity for the 39-week period
ended November 27, 2005. These interim financial statements are the responsibility of the Companys management.



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



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



We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheet of UAP Holding Corp. and subsidiaries as of February 27, 2005, and the related consolidated statements of earnings, stockholders equity, and cash flows for the year then ended (not presented herein) and in our
report dated May 27, 2005, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of February 27, 2005 is fairly
stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.



DELOITTE & TOUCHE LLP



Denver, Colorado



January 9, 2006



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UAP HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

UNAUDITED



|                                                                                                                                        |  |                   |           |   |                   |   |           |                   |  |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | - | ----------------- | - | --------- | ----------------- |  | - | --------- | -
|                                                                                                                                        |  | November 27, 2005 |           |   | February 27, 2005 |   |           | November 28, 2004 | 
|ASSETS                                                                                                                                  |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Current assets:                                                                                                                         |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Cash and cash equivalents                                                                                                               |  | $                 | 13,977    |   |                   | $ | 48,204    |                   |  | $ | 6,763     |  
|Receivables, less allowance for doubtful accounts of $16,119, $13,749 and $20,003                                                       |  |                   | 616,957   |   |                   |   | 234,824   |                   |  |   | 531,171   |  
|Inventories                                                                                                                             |  |                   | 536,641   |   |                   |   | 697,134   |                   |  |   | 490,649   |  
|Deferred income taxes                                                                                                                   |  |                   | 24,631    |   |                   |   | 17,263    |                   |  |   | 27,228    |  
|Vendor prepay                                                                                                                           |  |                   | 22,056    |   |                   |   | 149,010   |                   |  |   | 32,957    |  
|Other current assets                                                                                                                    |  |                   | 4,383     |   |                   |   | 8,753     |                   |  |   | 10,715    |  
|                                                                                                                                        |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Total current assets                                                                                                                    |  |                   | 1,218,645 |   |                   |   | 1,155,188 |                   |  |   | 1,099,483 |  
|Property, plant and equipment                                                                                                           |  |                   | 114,303   |   |                   |   | 104,745   |                   |  |   | 100,681   |  
|Less accumulated depreciation                                                                                                           |  |                   | (23,345   | ) |                   |   | (15,080   | )                 |  |   | (12,209   | )
|                                                                                                                                        |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Property, plant and equipment, net                                                                                                      |  |                   | 90,958    |   |                   |   | 89,665    |                   |  |   | 88,472    |  
|Goodwill                                                                                                                                |  |                   | 32,431    |   |                   |   | 34,645    |                   |  |   | 27,873    |  
|Intangible assets, net                                                                                                                  |  |                   | 25,022    |   |                   |   | 25,894    |                   |  |   | 29,527    |  
|Deferred income taxes                                                                                                                   |  |                   | 9,960     |   |                   |   | 6,967     |                   |  |   | 2,675     |  
|Debt issue costs, net                                                                                                                   |  |                   | 18,014    |   |                   |   | 20,259    |                   |  |   | 22,611    |  
|Investment in unconsolidated affiliates                                                                                                 |  |                   | 3,666     |   |                   |   | 4,071     |                   |  |   | 4,301     |  
|Other assets                                                                                                                            |  |                   | 466       |   |                   |   | 653       |                   |  |   | 653       |  
|                                                                                                                                        |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Total assets                                                                                                                            |  | $                 | 1,399,162 |   |                   | $ | 1,337,342 |                   |  | $ | 1,275,595 |  
|                                                                                                                                        |  |                   |           |   |                   |   |           |                   |  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                    |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Current liabilities:                                                                                                                    |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Short-term debt                                                                                                                         |  | $                 | 148,965   |   |                   | $ | 55        |                   |  | $ | 211,556   |  
|Accounts payable                                                                                                                        |  |                   | 630,187   |   |                   |   | 822,867   |                   |  |   | 531,885   |  
|Other accrued liabilities                                                                                                               |  |                   | 116,664   |   |                   |   | 72,164    |                   |  |   | 123,599   |  
|Income taxes payable                                                                                                                    |  |                   | 14,649    |   |                   |   | 3,252     |                   |  |   | 4,146     |  
|Deferred income taxes                                                                                                                   |  |                   | 1,580     |   |                   |   | 108       |                   |  |   | 46        |  
|                                                                                                                                        |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Total current liabilities                                                                                                               |  |                   | 912,045   |   |                   |   | 898,446   |                   |  |   | 871,232   |  
|Long-term debt                                                                                                                          |  |                   | 303,713   |   |                   |   | 295,948   |                   |  |   | 315,190   |  
|Series A redeemable preferred stock                                                                                                     |  |                   |          |   |                   |   |          |                   |  |   | 16,524    |  
|Other non-current liabilities                                                                                                           |  |                   | 2,753     |   |                   |   | 2,871     |                   |  |   | 2,644     |  
|Deferred income taxes                                                                                                                   |  |                   | 19,884    |   |                   |   | 23,590    |                   |  |   | 17,602    |  
|Commitments and contingencies (note 8)                                                                                                  |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Stockholders equity:                                                                                                                   |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Common stock, $.001 par value, 90,000,000 shares authorized, 50,473,349, 50,431,872 and 50,373,244 issued and outstanding,
respectively |  |                   | 50        |   |                   |   | 50        |                   |  |   | 50        |  
|Management stock  rabbi trust                                                                                                          |  |                   | 4,518     |   |                   |   | 4,819     |                   |  |   | 4,822     |  
|Due from public offering                                                                                                                |  |                   |          |   |                   |   |          |                   |  |   | (46,937   | )
|Additional paid-in capital                                                                                                              |  |                   | 111,867   |   |                   |   | 109,863   |                   |  |   | 103,748   |  
|Retained earnings (deficit)                                                                                                             |  |                   | 39,104    |   |                   |   | (1,535    | )                 |  |   | (13,951   | )
|Accumulated other comprehensive income                                                                                                  |  |                   | 5,228     |   |                   |   | 3,290     |                   |  |   | 4,671     |  
|                                                                                                                                        |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Stockholders equity                                                                                                                    |  |                   | 160,767   |   |                   |   | 116,487   |                   |  |   | 52,403    |  
|                                                                                                                                        |  |                   |           |   |                   |   |           |                   |  |   |           |  
|Total liabilities and stockholders equity                                                                                              |  | $                 | 1,399,162 |   |                   | $ | 1,337,342 |                   |  | $ | 1,275,595 |  
|                                                                                                                                        |  |                   |           |   |                   |   |           |                   |  |   |           |  



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



4



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UAP HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in thousands, except share data)

UNAUDITED



|                                                           |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|---------------------------------------------------------- |  | -------------------- | ---------- | - | --------------------------------------- | - | ---------- | --------------------------------- |  | - | ---------- | - |  | - | ---------- | -
|                                                           |  | Thirteen Weeks Ended |            |   | Thirty-NineWeeks EndedNovember 27, 2005 |   |            | FortyWeeks EndedNovember 28, 2004 | 
|                                                           |  | November 27, 2005    |            |   | November 28, 2004                       |   |            |                                  
|Net sales                                                  |  | $                    | 323,089    |   |                                         | $ | 267,157    |                                   |  | $ | 2,437,458  |   |  | $ | 2,229,627  |  
|Costs and expenses:                                        |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Cost of goods sold                                         |  |                      | 272,547    |   |                                         |   | 249,835    |                                   |  |   | 2,107,891  |   |  |   | 1,969,549  |  
|                                                           |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Gross profit                                               |  |                      | 50,542     |   |                                         |   | 17,322     |                                   |  |   | 329,567    |   |  |   | 260,078    |  
|Selling, general and administrative expenses               |  |                      | 56,301     |   |                                         |   | 54,186     |                                   |  |   | 216,362    |   |  |   | 207,578    |  
|(Gain) loss on sale of assets                              |  |                      | (59        | ) |                                         |   | 642        |                                   |  |   | (1,532     | ) |  |   | (623       | )
|Restructuring costs                                        |  |                      | 970        |   |                                         |   | 857        |                                   |  |   | 1,460      |   |  |   | 857        |  
|Royalties, service charges and other (income) and expenses |  |                      | (2,915     | ) |                                         |   | (6,073     | )                                 |  |   | (20,739    | ) |  |   | (18,847    | )
|                                                           |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Operating income (loss)                                    |  |                      | (3,755     | ) |                                         |   | (32,290    | )                                 |  |   | 134,016    |   |  |   | 71,113     |  
|Third party interest expense                               |  |                      | 10,885     |   |                                         |   | 11,683     |                                   |  |   | 28,179     |   |  |   | 33,766     |  
|Finance related and other charges                          |  |                      |           |   |                                         |   | 7,903      |                                   |  |   |           |   |  |   | 11,653     |  
|                                                           |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Income (loss) before income taxes                          |  |                      | (14,640    | ) |                                         |   | (51,876    | )                                 |  |   | 105,837    |   |  |   | 25,694     |  
|Income tax expense (benefit)                               |  |                      | (5,292     | ) |                                         |   | (20,954    | )                                 |  |   | 42,490     |   |  |   | 9,298      |  
|                                                           |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Net income (loss)                                          |  | $                    | (9,348     | ) |                                         | $ | (30,922    | )                                 |  | $ | 63,347     |   |  | $ | 16,396     |  
|                                                           |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Earnings (loss) per share:                                 |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Basic                                                      |  | $                    | (0.19      | ) |                                         | $ | (0.65      | )                                 |  | $ | 1.26       |   |  | $ | 0.35       |  
|                                                           |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Diluted                                                    |  | $                    | (0.19      | ) |                                         | $ | (0.65      | )                                 |  | $ | 1.21       |   |  | $ | 0.33       |  
|                                                           |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Cash dividends declared per share of common stock          |  | $                    | 0.1625     |   |                                         | $ |           |                                   |  | $ | 0.45       |   |  | $ |           |  
|                                                           |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Weighted average shares outstanding:                       |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Basic                                                      |  |                      | 50,472,405 |   |                                         |   | 47,488,629 |                                   |  |   | 50,449,776 |   |  |   | 47,278,191 |  
|                                                           |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  
|Diluted                                                    |  |                      | 50,472,405 |   |                                         |   | 47,488,629 |                                   |  |   | 52,352,306 |   |  |   | 49,123,597 |  
|                                                           |  |                      |            |   |                                         |   |            |                                   |  |   |            |   |  |   |            |  



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



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UAP HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

UNAUDITED



|                                                                             |  |                                         |          |   |                                   |   |          |  
|---------------------------------------------------------------------------- |  | --------------------------------------- | -------- | - | --------------------------------- | - | -------- | -
|                                                                             |  | Thirty-NineWeeks EndedNovember 27, 2005 |          |   | FortyWeeks EndedNovember 28, 2004 |  
|Operations                                                                   |  |                                         |          |   |                                   |   |          |  
|Net income                                                                   |  | $                                       | 63,347   |   |                                   | $ | 16,396   |  
|Adjustments to reconcile net income to net cash used in operating activities |  |                                         |          |   |                                   |   |          |  
|Depreciation                                                                 |  |                                         | 8,519    |   |                                   |   | 9,541    |  
|Amortization of intangibles                                                  |  |                                         | 1,021    |   |                                   |   | 1,145    |  
|Amortization of debt issuance costs                                          |  |                                         | 3,290    |   |                                   |   | 2,825    |  
|Accretion of discount on notes                                               |  |                                         | 7,766    |   |                                   |   | 6,620    |  
|Gain on sales of fixed assets                                                |  |                                         | (1,530   | ) |                                   |   | (623     | )
|Deferred tax benefit                                                         |  |                                         | (12,595  | ) |                                   |   | (481     | )
|Stock compensation                                                           |  |                                         | 586      |   |                                   |   | 885      |  
|Change in operating assets and liabilities                                   |  |                                         | (239,634 | ) |                                   |   | (312,405 | )
|                                                                             |  |                                         |          |   |                                   |   |          |  
|Net cash used in operations                                                  |  |                                         | (169,230 | ) |                                   |   | (276,097 | )
|Investing                                                                    |  |                                         |          |   |                                   |   |          |  
|Acquisition payment to ConAgra Foods, Inc.                                   |  |                                         |         |   |                                   |   | (58,236  | )
|Additions to property, plant and equipment                                   |  |                                         | (10,226  | ) |                                   |   | (9,362   | )
|Proceeds from sales of assets                                                |  |                                         | 2,184    |   |                                   |   | 3,246    |  
|Other                                                                        |  |                                         | 405      |   |                                   |   | (343     | )
|                                                                             |  |                                         |          |   |                                   |   |          |  
|Net cash used in investing activities                                        |  |                                         | (7,637   | ) |                                   |   | (64,695  | )
|                                                                             |  |                                         |          |   |                                   |   |          |  
|Financing                                                                    |  |                                         |          |   |                                   |   |          |  
|Check float on zero balance accounts                                         |  |                                         | 8,143    |   |                                   |   | 16,772   |  
|Net borrowings of short-term debt                                            |  |                                         | 148,910  |   |                                   |   | 211,556  |  
|Debt issuance costs                                                          |  |                                         | (1,046   | ) |                                   |   |         |  
|Dividends paid                                                               |  |                                         | (14,505  | ) |                                   |   | (40,000  | )
|Series A preferred stock redemption and net dividends                        |  |                                         |         |   |                                   |   | (18,096  | )
|Proceeds from options exercised                                              |  |                                         | 377      |   |                                   |   |         |  
|                                                                             |  |                                         |          |   |                                   |   |          |  
|Net cash provided by financing activities                                    |  |                                         | 141,879  |   |                                   |   | 170,232  |  
|                                                                             |  |                                         |          |   |                                   |   |          |  
|Net change in cash and cash equivalents                                      |  |                                         | (34,988  | ) |                                   |   | (170,560 | )
|Net effect of exchange rates on cash and cash equivalents                    |  |                                         | 761      |   |                                   |   | 4,676    |  
|                                                                             |  |                                         |          |   |                                   |   |          |  
|Net change in cash and cash equivalents                                      |  |                                         | (34,227  | ) |                                   |   | (165,884 | )
|Cash and cash equivalents at beginning of period                             |  |                                         | 48,204   |   |                                   |   | 172,647  |  
|                                                                             |  |                                         |          |   |                                   |   |          |  
|Cash and cash equivalents at end of period                                   |  | $                                       | 13,977   |   |                                   | $ | 6,763    |  
|                                                                             |  |                                         |          |   |                                   |   |          |  
|Supplemental disclosure of cash flow information:                            |  |                                         |          |   |                                   |   |          |  
|Cash paid during the period for interest                                     |  | $                                       | 13,597   |   |                                   | $ | 18,478   |  
|Net cash paid during the period for income taxes                             |  | $                                       | 31,088   |   |                                   | $ | 20,877   |  
|Dividends declared but not yet paid                                          |  | $                                       | 8,203    |   |                                   | $ |         |  



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



6



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UAP HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(dollars in thousands)

UNAUDITED



|                                                    |  |             |    |             |   |       |                          |  |                  |         |  |                                     |         |                          |  |   |       |  |   |         |  
|--------------------------------------------------- |  | ----------- | -- | ----------- | - | ----- | ------------------------ |  | ---------------- | ------- |  | ----------------------------------- | ------- | ------------------------ |  | - | ----- |  | - | ------- | -
|Thirty-Nine Weeks Ended November 27, 2005           |  | CommonStock |    | Rabbi Trust |   |       | AdditionalPaid inCapital |  | RetainedEarnings |         |  | AccumulatedOtherComprehensiveIncome |         | TotalStockholdersEquity | 
|Balance at February 27, 2005                        |  | $           | 50 |             | $ | 4,819 |                          |  | $                | 109,863 |  | $                                   | (1,535  | )                        |  | $ | 3,290 |  | $ | 116,487 |  
|Dividends to stockholders                           |  |             |   |             |   |      |                          |  |                  |        |  |                                     | (22,708 | )                        |  |   |      |  |   | (22,708 | )
|Stock options exercised                             |  |             |   |             |   |      |                          |  |                  | 377     |  |                                     |        |                          |  |   |      |  |   | 377     |  
|Distribution from rabbi trust including tax benefit |  |             |    |             |   | (301  | )                        |  |                  | 1,041   |  |                                     |         |                          |  |   |       |  |   | 740     |  
|Restricted stock unit vesting                       |  |             |   |             |   |      |                          |  |                  | 586     |  |                                     |        |                          |  |   |      |  |   | 586     |  
|Comprehensive income:                               |  |             |    |             |   |       |                          |  |                  |         |  |                                     |         |                          |  |   |       |  |   |         |  
|Net income                                          |  |             |   |             |   |      |                          |  |                  |        |  |                                     | 63,347  |                          |  |   |      |  |   | 63,347  |  
|Foreign currency translation adjustment             |  |             |   |             |   |      |                          |  |                  |        |  |                                     |        |                          |  |   | 1,938 |  |   | 1,938   |  
|                                                    |  |             |    |             |   |       |                          |  |                  |         |  |                                     |         |                          |  |   |       |  |   |         |  
|Balance at November 27, 2005                        |  | $           | 50 |             | $ | 4,518 |                          |  | $                | 111,867 |  | $                                   | 39,104  |                          |  | $ | 5,228 |  | $ | 160,767 |  
|                                                    |  |             |    |             |   |       |                          |  |                  |         |  |                                     |         |                          |  |   |       |  |   |         |  



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



7



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UAP HOLDING CORP.



NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week Periods Ended November 27, 2005 and the
Thirteen and Forty Week Periods Ended November 28, 2004



UNAUDITED



|1. | Description of the Business and Basis of Presentation
|-- | -----------------------------------------------------



Interim Financial Statements. The accompanying unaudited condensed consolidated financial statements of UAP Holding Corp. and its subsidiaries (the
Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and reflect all adjustments (consisting of normal recurring
accruals and changes in estimates) which, in the opinion of management, are necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented. These financial statements should be read in
conjunction with the consolidated and combined financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended February 27, 2005.



Business. We are the largest distributor of agricultural and non-crop inputs in the United States and Canada. We market a
comprehensive line of products including chemicals, seed and fertilizer to growers and regional dealers. We have approximately 330 general distribution centers and sales locations. We also have three formulation facilities where we blend products
primarily for sale by our distribution facilities.



On November 24, 2003,
Apollo Management, L.P. (Apollo), us and ConAgra Foods consummated a transaction in which we acquired ConAgra Foods United States and Canadian Agricultural Products Businesses, excluding its wholesale fertilizer and other
international crop distribution businesses, which we refer to as the Acquisition. On November 29, 2004, we consummated the initial public offering of our common stock (the Common Stock Offering), which is traded under
the symbol UAPH on the NASDAQ National Market.



Principles of
Consolidation. The consolidated financial statements include our accounts and the accounts of all our wholly-owned subsidiaries. Significant intercompany balances and transactions have been eliminated. Investments in 50% or less owned
affiliates over which we do not have the ability to exercise significant control are accounted for using the equity method.



Fiscal Year. Our fiscal year operates on a 52- or 53-week period ending on the last Sunday in February. Our fiscal year 2006 contains 52 weeks while our
fiscal year 2005 contained 53 weeks. The additional week in fiscal year 2005 was included in the first quarter.



Seasonality. Our and our customers businesses are seasonal, based upon the planting, growing, and harvesting cycles. Typically, at least 75% of our
net sales occur during the first and second fiscal quarters of each year because of the condensed nature of the planting season. As a result of the seasonality of sales, we experience significant fluctuations in our revenues, income and net working
capital levels. In addition, weather conditions can significantly vary quarterly results.



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



Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions. These estimates or assumptions affect reported amounts of assets, liabilities, revenue and expenses as reflected in the financial statements. Actual results could differ from those estimates and
the differences could be material. The most significant estimate reflected in the Companys financial statements is the accrual for vendor rebates. Estimates are also required in accounting for the allowance for doubtful accounts, inventory
reserves, asset retirement obligations, restructuring charges, sales returns, insurance reserves, income taxes and other items.



Vendor Rebates Receivable.At the beginning of each crop year, we enter into agreements with many of our suppliers providing for vendor rebates upon the
achievement of specified volume purchasing or sales levels. Most of these rebates are covered by binding arrangements or published programs. Such rebates that are probable and reasonably estimable are accrued at expected rates based on total
estimated crop year performance. Such rebates that are not probable or estimable are accrued when certain milestones are actually achieved. We also receive rebates not covered by binding agreements or



8



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##### Table of Contents

published vendor programs as part of negotiations with suppliers after the end of the crop year. These rebates are accrued when conclusive documentation of
right of receipt is obtained. Rebates based on the amount of materials purchased are offset to cost of goods sold as inventory is depleted. Rebates that are based on the amount of sales volume are offset to cost of goods sold when earned.



Due to the nature of rebate programs, estimates of rebates earned can vary
significantly from period to period, and when comparing comparable periods of the current and prior year, and more likely than not will trail sales. Due to a combination of factors as compared to last year  changes in vendor programs, the
Companys new rebate tracking system, and improvements in operating performance that have led to greater probability of achieving higher rebate levels  the Company has accrued more rebate earnings in and through the third quarter of 2006
as compared to the same periods of 2005.



Earnings Per Share.
Earnings per share are based on the weighted average number of shares of common stock outstanding during the period. The basic and diluted weighted average share calculation for the thirteen weeks ended November 27, 2005, and November 28,
2004, and the thirty-nine weeks and forty week periods ended November 27, 2005, and November 28, 2004, are presented in the following table.



|                                                                                                      |  |                                                           |            |   |                                         |   |                                   |   |  |   |            |  |   |           
|----------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------- | ---------- | - | --------------------------------------- | - | --------------------------------- | - |  | - | ---------- |  | - | ----------
|                                                                                                      |  | Thirteen Weeks Ended                                      |            |   | Thirty-NineWeeks EndedNovember 27, 2005 |   | FortyWeeks EndedNovember 28, 2004
|Earnings per share                                                                                    |  | November 27, 2005                                         |            |   | November 28, 2004                       |   |                                   |  
|                                                                                                      |  | (dollars in thousands, except earnings per share amounts)
|Net income (loss)                                                                                     |  | $                                                         | (9,348     | ) |                                         | $ | (30,922                           | ) |  | $ | 63,347     |  | $ | 16,396    
|                                                                                                      |  |                                                           |            |   |                                         |   |                                   |   |  |   |            |  |   |           
|Weighted average shares of common stock outstanding used in computing basic earnings (loss) per share |  |                                                           | 50,472,405 |   |                                         |   | 47,488,629                        |   |  |   | 50,449,776 |  |   | 47,278,191
|Net effect of restricted stock units                                                                  |  |                                                           |           |   |                                         |   |                                  |   |  |   | 206,032    |  |   |          
|Net effect of dilutive stock options                                                                  |  |                                                           |           |   |                                         |   |                                  |   |  |   | 1,696,498  |  |   | 1,845,406 
|                                                                                                      |  |                                                           |            |   |                                         |   |                                   |   |  |   |            |  |   |           
|Weighted average shares of common stock used in computing diluted earnings (loss) per share           |  |                                                           | 50,472,405 |   |                                         |   | 47,488,629                        |   |  |   | 52,352,306 |  |   | 49,123,597
|                                                                                                      |  |                                                           |            |   |                                         |   |                                   |   |  |   |            |  |   |           
|Basic earnings (loss) per share                                                                       |  | $                                                         | (0.19      | ) |                                         | $ | (0.65                             | ) |  | $ | 1.26       |  | $ | 0.35      
|                                                                                                      |  |                                                           |            |   |                                         |   |                                   |   |  |   |            |  |   |           
|Diluted earnings (loss) per share                                                                     |  | $                                                         | (0.19      | ) |                                         | $ | (0.65                             | ) |  | $ | 1.21       |  | $ | 0.33      
|                                                                                                      |  |                                                           |            |   |                                         |   |                                   |   |  |   |            |  |   |           



Stock Based
Compensation. We account for employee stock option plans in accordance with Accounting Principles Board Opinion No 25, Accounting for Stock Issued to Employees. Accordingly, no stock based compensation expense is reflected in net
income, as options granted under these plans have an exercise price equal to the market value of the underlying common stock on the date of the grant.



The impact on our net income if we applied the fair value measurement provisions of Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation would be as follows:



|                                                                                                                          |  |                                                           |        |   |                                         |   |         |                                   |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------- | ------ | - | --------------------------------------- | - | ------- | --------------------------------- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                          |  | Thirteen Weeks Ended                                      |        |   | Thirty-NineWeeks EndedNovember 27, 2005 |   |         | FortyWeeks EndedNovember 28, 2004 | 
|Stock-Based Compensation                                                                                                  |  | November 27, 2005                                         |        |   | November 28, 2004                       |   |         |                                  
|                                                                                                                          |  | (dollars in thousands, except earnings per share amounts) |       
|Net income (loss) as reported                                                                                             |  | $                                                         | (9,348 | ) |                                         | $ | (30,922 | )                                 |  | $ | 63,347 |   |  | $ | 16,396 |  
|Add: Stock-based employee compensation included in reported net income, net of tax                                        |  |                                                           | 128    |   |                                         |   |        |                                   |  |   | 351    |   |  |   | 565    |  
|Less: Total stock-based employee compensation expense determined under fair-value-based method for all awards, net of tax |  |                                                           | (127   | ) |                                         |   | (36     | )                                 |  |   | (374   | ) |  |   | (672   | )
|                                                                                                                          |  |                                                           |        |   |                                         |   |         |                                   |  |   |        |   |  |   |        |  
|Pro forma net income (loss)                                                                                               |  | $                                                         | (9,347 | ) |                                         | $ | (30,958 | )                                 |  | $ | 63,324 |   |  | $ | 16,289 |  
|                                                                                                                          |  |                                                           |        |   |                                         |   |         |                                   |  |   |        |   |  |   |        |  
|Basic earnings (loss) per share:                                                                                          |  |                                                           |        |   |                                         |   |         |                                   |  |   |        |   |  |   |        |  
|As reported                                                                                                               |  | $                                                         | (0.19  | ) |                                         | $ | (0.65   | )                                 |  | $ | 1.26   |   |  | $ | 0.35   |  
|Pro forma                                                                                                                 |  | $                                                         | (0.19  | ) |                                         | $ | (0.65   | )                                 |  | $ | 1.26   |   |  | $ | 0.34   |  
|Diluted earnings (loss) per share:                                                                                        |  |                                                           |        |   |                                         |   |         |                                   |  |   |        |   |  |   |        |  
|As reported                                                                                                               |  | $                                                         | (0.19  | ) |                                         | $ | (0.65   | )                                 |  | $ | 1.21   |   |  | $ | 0.33   |  
|Pro forma                                                                                                                 |  | $                                                         | (0.19  | ) |                                         | $ | (0.65   | )                                 |  | $ | 1.21   |   |  | $ | 0.33   |  



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Reclassifications. Certain prior period amounts in the condensed consolidated financial statements have
been reclassified to conform to current period presentation. These reclassifications had no net impact on previously reported results of operations. We reclassified royalties, service charges, other income and expenses and finance related and other
charges which were previously included in other income and selling, general and administrative expenses. We reclassified restructuring costs that were previously included in cost of goods sold and selling general and administrative expense. We also
segregated vendor prepay from other current assets.



|2. | Royalties, Service Charges and Other Income and Expenses
|-- | --------------------------------------------------------



The table below details royalties, service charges and other income and expenses.



|                                                           |  |                        |        |   |                                         |   |        |                                   |  |   |         |   |  |   |         |  
|---------------------------------------------------------- |  | ---------------------- | ------ | - | --------------------------------------- | - | ------ | --------------------------------- |  | - | ------- | - |  | - | ------- | -
|                                                           |  | Thirteen Weeks Ended   |        |   | Thirty-NineWeeks EndedNovember 27, 2005 |   |        | FortyWeeks EndedNovember 28, 2004 | 
|Royalties, service charges and other (income) and expenses |  | November 27, 2005      |        |   | November 28, 2004                       |   |        |                                  
|                                                           |  | (dollars in thousands) |       
|Royalty (income)                                           |  | $                      | (200   | ) |                                         | $ | (2,060 | )                                 |  | $ | (9,154  | ) |  | $ | (7,207  | )
|Service charge (income)                                    |  |                        | (1,470 | ) |                                         |   | (2,704 | )                                 |  |   | (5,510  | ) |  |   | (6,604  | )
|Other (income)                                             |  |                        | (1,245 | ) |                                         |   | (1,309 | )                                 |  |   | (6,075  | ) |  |   | (5,036  | )
|                                                           |  |                        |        |   |                                         |   |        |                                   |  |   |         |   |  |   |         |  
|Royalties, service charges and other (income) and expenses |  | $                      | (2,915 | ) |                                         | $ | (6,073 | )                                 |  | $ | (20,739 | ) |  | $ | (18,847 | )
|                                                           |  |                        |        |   |                                         |   |        |                                   |  |   |         |   |  |   |         |  



|3. | Finance Related and Other Charges
|-- | ---------------------------------



Finance related and other charges are composed of costs and fees related to the Acquisition, the Common Stock Offering, and related financing activities. For the thirteen
and forty weeks ended November 28, 2004, these charges consisted of $7.9 million and $11.6 million, respectively, relating to fees and expenses from an abandoned securities offering and transition service expenses from ConAgra Foods for the
Acquisition.



|4. | Certain Asset Accounts
|-- | ----------------------



Receivables and Allowance for Doubtful Accounts. Our receivables include receivables from customers net of allowances for doubtful accounts, vendor rebates
receivable, and miscellaneous receivables. As of November 27, 2005, February 27, 2005, and November 28, 2004, the net receivables from customers were $484.3 million, $192.5 million, and $406.6 million, respectively, vendor
rebates receivable were $122.0 million, $23.2 million, and $91.4 million, respectively, and miscellaneous receivables were $10.7 million, $19.1 million, and $33.2 million, respectively. The net receivables from customers include receivables from
unconsolidated investees in the amounts of $2.5 million, $4.0 million, and $5.2 million as of November 27, 2005, February 27, 2005, and November 28, 2004, respectively.



Inventories. Inventories consist primarily of chemicals, fertilizer, and seed,
and are carried at the lower of cost or market. As of November 27, 2005, February 27, 2005, and November 28, 2004, we had $8.3 million, $25.8 million, and $9.4 million, respectively, of allowances against inventory.



The cost of inventory at distribution locations is carried either at average cost or first
in, first out (FIFO). As of November 27, 2005, February 27, 2005, and November 28, 2004, approximately 87.3%, 23.5%, and 11.6%, respectively, of inventory was reported on the average cost basis.



Inventories are comprised of the following:



|                                  |  |                        |         |                   |   |                   |  |   |        
|--------------------------------- |  | ---------------------- | ------- | ----------------- | - | ----------------- |  | - | -------
|                                  |  | November 27, 2005      |         | February 27, 2005 |   | November 28, 2004
|                                  |  | (dollars in thousands)
|Raw materials and work in process |  | $                      | 9,525   |                   | $ | 12,827            |  | $ | 9,656  
|Finished goods                    |  |                        | 527,116 |                   |   | 684,307           |  |   | 480,993
|                                  |  |                        |         |                   |   |                   |  |   |        
|Total                             |  | $                      | 536,641 |                   | $ | 697,134           |  | $ | 490,649
|                                  |  |                        |         |                   |   |                   |  |   |        



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Goodwill. At November 27, 2005, February 27, 2005, and November 28, 2004, goodwill
totaled $32.4 million, $34.6 million, and $27.9 million, respectively, with no amortization. During the third quarter of fiscal 2005, we finalized the Acquisition purchase price allocation with the assistance of a third party valuation of certain
intangible assets that had been categorized as goodwill. During the third quarter of fiscal 2006, we reduced goodwill to reflect the benefit of a current period reduction of the deferred tax liability established in the initial acquisition purchase
price allocation.



Debt Issuance Costs. Our debt issuance costs
net of amortization were $18.0 million, $20.3 million, and $22.6 million as of November 27, 2005, February 27, 2005, and November 28, 2004, respectively. Our debt issuance costs consisted of costs associated with United Agri
Products, Inc.s revolving credit facility, United Agri Products, Inc.s 81/4% Senior Notes due 2011 (the 81/4% Senior Notes), and our 103/4%
Senior Discount Notes due 2012 (the 103/4% Senior Discount Notes). Debt issuance costs of $1.0 million were recognized in the first three quarters of fiscal year 2006 for the exchange offers relating to the
81/4% Senior Notes and the 103/4% Senior Discount Notes.



|5. | Costs Associated with Restructuring
|-- | -----------------------------------



In the quarter ended November 27, 2005, we began consolidating ten regional distribution centers into five, closing one regional finance center, and centralizing and
consolidating various administrative functions. During the second half of fiscal 2005, we began closing two formulating plants. The tables below show the activity related to costs associated with these restructuring activities.



|                                   |                   |                        |     |                                         |  |                                    |     |  |   |       |  |   |    
|---------------------------------- | ----------------- | ---------------------- | --- | --------------------------------------- |  | ---------------------------------- | --- |  | - | ----- |  | - | ---
|Expenses related to restructuring: |                   | Thirteen Weeks Ended   |     | Thirty-NineWeeks EndedNovember 27, 2005 |  | FortyWeeks Ended November 28, 2004
|                                   | November 27, 2005 |                        |     | November 28, 2004                       |  |                                   
|                                   |                   | (dollars in thousands)
|Severance expenses                 |                   | $                      | 841 |                                         |  | $                                  | 203 |  | $ | 786   |  | $ | 203
|Contract termination costs         |                   |                        | 188 |                                         |  |                                    |    |  |   | 240   |  |   |   
|Other associated costs             |                   |                        | (59 | )                                       |  |                                    | 654 |  |   | 434   |  |   | 654
|                                   |                   |                        |     |                                         |  |                                    |     |  |   |       |  |   |    
|Total restructuring expenses       |                   | $                      | 970 |                                         |  | $                                  | 857 |  | $ | 1,460 |  | $ | 857



During the thirteen weeks ended
November 27, 2005, we completed one formulating plant closure which was begun in fiscal 2005. Remaining accrued obligations of $76 thousand were offset against current quarter restructuring expenses.



|                                                       |  |                        |        |   |                   |   |      |                   |  |   |      |  
|------------------------------------------------------ |  | ---------------------- | ------ | - | ----------------- | - | ---- | ----------------- |  | - | ---- | -
|Liability balance related to restructuring activities: |  | November 27, 2005      |        |   | February 27, 2005 |   |      | November 28, 2004 | 
|                                                       |  | (dollars in thousands) |       
|Beginning fiscal year balance                          |  | $                      | (724   | ) |                   | $ |     |                   |  | $ |     |  
|Additional expense recognized                          |  |                        | (1,460 | ) |                   |   | (903 | )                 |  |   | (858 | )
|Severance and other expenses settled                   |  |                        | 1,262  |   |                   |   | 179  |                   |  |   |     |  
|                                                       |  |                        |        |   |                   |   |      |                   |  |   |      |  
|Total                                                  |  | $                      | (922   | ) |                   | $ | (724 | )                 |  | $ | (858 | )
|                                                       |  |                        |        |   |                   |   |      |                   |  |   |      |  



As of November 27, 2005, we have
incurred $1.4 million of the estimated $1.5 million of costs for the restructuring activities which began in fiscal year 2005. We have also incurred $1.0 million of the estimated $1.9 million of costs for the restructuring activities which began in
fiscal year 2006.



|6. | Income Taxes
|-- | ------------



The following table summarizes the factors causing our income taxes to differ from U.S. federal statutory rates for the thirteen and thirty-nine weeks ended November 27, 2005, and the thirteen and forty weeks
ended November 28, 2004:



|                                                 |                   |                        |        |                   |                                         |   |         |                                   |  |   |        |   |  |   |       |  
|------------------------------------------------ | ----------------- | ---------------------- | ------ | ----------------- | --------------------------------------- | - | ------- | --------------------------------- |  | - | ------ | - |  | - | ----- | -
|                                                 |                   | Thirteen Weeks Ended   |        |                   | Thirty-NineWeeks EndedNovember 27, 2005 |   |         | FortyWeeks EndedNovember 28, 2004 | 
|                                                 | November 27, 2005 |                        |        | November 28, 2004 |                                         |   |        
|                                                 |                   | (dollars in thousands) |       
|U.S. federal statutory rate                      |                   | $                      | (5,124 | )                 |                                         | $ | (18,157 | )                                 |  | $ | 37,043 |   |  | $ | 8,993 |  
|Dividends on shares of stock held in rabbi trust |                   |                        | (100   | )                 |                                         |   | (745    | )                                 |  |   | (285   | ) |  |   | (745  | )
|State income taxes                               |                   |                        | (221   | )                 |                                         |   | (2,093  | )                                 |  |   | 5,012  |   |  |   | 616   |  
|Foreign credits                                  |                   |                        | (306   | )                 |                                         |   | (82     | )                                 |  |   | (376   | ) |  |   | (82   | )
|Other                                            |                   |                        | 459    |                   |                                         |   | 123     |                                   |  |   | 1,096  |   |  |   | 516   |  
|                                                 |                   |                        |        |                   |                                         |   |         |                                   |  |   |        |   |  |   |       |  
|Total                                            |                   | $                      | (5,292 | )                 |                                         | $ | (20,954 | )                                 |  | $ | 42,490 |   |  | $ | 9,298 |  
|                                                 |                   |                        |        |                   |                                         |   |         |                                   |  |   |        |   |  |   |       |  



11



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We file our fiscal year end income tax return during the third quarter. Adjustments of our fiscal 2004 and 2005 income
tax provisions, which are based in part on estimates, to the actual filed tax returns were a $0.4 million charge during the three quarters ended November 27, 2005, as compared to a $0.9 million benefit during the three quarters ended
November 28, 2004.



The components of our income tax provision are as
follows:



|                                                      |                   |                        |        |                   |                                         |   |         |                                   |  |   |         |   |  |   |       |  
|----------------------------------------------------- | ----------------- | ---------------------- | ------ | ----------------- | --------------------------------------- | - | ------- | --------------------------------- |  | - | ------- | - |  | - | ----- | -
|Income tax provision (benefit)                        |                   | Thirteen Weeks Ended   |        |                   | Thirty-NineWeeks EndedNovember 27, 2005 |   |         | FortyWeeks EndedNovember 28, 2004 | 
|                                                      | November 27, 2005 |                        |        | November 28, 2004 |                                         |   |        
|                                                      |                   | (dollars in thousands) |       
|Current:                                              |                   |                        |        |                   |                                         |   |         |                                   |  |   |         |   |  |   |       |  
|U.S. federal                                          |                   | $                      | 156    |                   |                                         | $ | 3,119   |                                   |  | $ | 45,011  |   |  | $ | 5,306 |  
|U.S. state                                            |                   |                        | 162    |                   |                                         |   | 382     |                                   |  |   | 6,213   |   |  |   | 664   |  
|Outside United States                                 |                   |                        | 386    |                   |                                         |   | (316    | )                                 |  |   | 3,826   |   |  |   | 3,809 |  
|Effect of foreign currency exchange on deferred taxes |                   |                        | 16     |                   |                                         |   |        |                                   |  |   | 35      |   |  |   |      |  
|                                                      |                   |                        |        |                   |                                         |   |         |                                   |  |   |         |   |  |   |       |  
|Total current                                         |                   |                        | 720    |                   |                                         |   | 3,185   |                                   |  |   | 55,085  |   |  |   | 9,779 |  
|Deferred:                                             |                   |                        |        |                   |                                         |   |         |                                   |  |   |         |   |  |   |       |  
|U.S. federal                                          |                   |                        | (5,613 | )                 |                                         |   | (21,665 | )                                 |  |   | (11,359 | ) |  |   | (433  | )
|U.S. state                                            |                   |                        | (383   | )                 |                                         |   | (2,474  | )                                 |  |   | (1,201  | ) |  |   | (48   | )
|Effect of foreign currency exchange on deferred taxes |                   |                        | (16    | )                 |                                         |   |        |                                   |  |   | (35     | ) |  |   |      |  
|                                                      |                   |                        |        |                   |                                         |   |         |                                   |  |   |         |   |  |   |       |  
|Total deferred                                        |                   |                        | (6,012 | )                 |                                         |   | (24,139 | )                                 |  |   | (12,595 | ) |  |   | (481  | )
|                                                      |                   |                        |        |                   |                                         |   |         |                                   |  |   |         |   |  |   |       |  
|Total                                                 |                   | $                      | (5,292 | )                 |                                         | $ | (20,954 | )                                 |  | $ | 42,490  |   |  | $ | 9,298 |  
|                                                      |                   |                        |        |                   |                                         |   |         |                                   |  |   |         |   |  |   |       |  



We currently estimate that there will
be a foreign tax credit carryover of approximately $0.6 million, $0.2 million of which will expire in fiscal year 2015 and the balance of which will expire in fiscal year 2016. We have posted no valuation allowance against the deferred tax asset for
this credit carryover because, based on current projections and tax planning options, we believe it is more likely than not we will utilize these credits before they expire.



|7. | Debt
|-- | ----



Total current and long-term debt as of November 27, 2005, February 27, 2005, and November 28, 2004, consisted of the following:



|                                                |  |                        |         |                   |   |                   |  |   |        
|----------------------------------------------- |  | ---------------------- | ------- | ----------------- | - | ----------------- |  | - | -------
|                                                |  | November 27, 2005      |         | February 27, 2005 |   | November 28, 2004
|                                                |  | (dollars in thousands)
|Total debt                                      |  |                        |         |                   |   |                   |  |   |        
|Revolving credit facility                       |  | $                      | 148,965 |                   | $ | 55                |  | $ | 211,556
|81/4% Senior Notes                              |  |                        | 203,500 |                   |   | 203,500           |  |   | 225,000
|103/4% Senior Discount Notes, at accreted value |  |                        | 100,213 |                   |   | 92,448            |  |   | 90,190 
|                                                |  |                        |         |                   |   |                   |  |   |        
|Total debt                                      |  |                        | 452,678 |                   |   | 296,003           |  |   | 526,746
|Less: current portion                           |  |                        |         |                   |   |                   |  |   |        
|Revolving credit facility                       |  |                        | 148,965 |                   |   | 55                |  |   | 211,556
|                                                |  |                        |         |                   |   |                   |  |   |        
|Total long-term debt                            |  | $                      | 303,713 |                   | $ | 295,948           |  | $ | 315,190
|                                                |  |                        |         |                   |   |                   |  |   |        



United Agri Products, Inc.s
$500.0 million asset based revolving credit facility will mature in 2008.



At
November 27, 2005, there was $486.9 million of borrowing availability under the revolving credit facility and United Agri Products Inc. had borrowing capacity thereunder of $464.4 million (after giving effect to $22.5 million of letters of
credit under the sub-facility).



On December 29, 2004, $21.5 million of
the 8 1/4% Senior Notes were redeemed with proceeds from the Common Stock Offering. In addition, United
Agri Products, Inc. may redeem some or all of the remaining 8 1/4% Senior Notes at a redemption price that
may include a redemption premium and a make-whole premium.



12



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##### Table of Contents

The increase in the 103/4% Senior Discount Notes is due primarily to accretion of the discount.



As of November 27, 2005, management believes approximately $46 million of permitted distributions were available under our restricted payment covenant in our
indenture governing the 103/4% Senior Discount Notes before giving effect to the December 1, 2005 dividend
payment of $8.2 million.



|8. | Commitments and Contingencies
|-- | -----------------------------



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



|9. | Employee Benefit Plans
|-- | ----------------------



Management Incentive Program. We have a management incentive plan for key officers and employees, based on growth, profitability, individual performance of
each operating center and key performance metrics. Amounts charged to expense totaled $2.2 million and $29.3 million for the thirteen and thirty-nine weeks ended November 27, 2005, respectively, and $0.7 million and $30.6 million for the
thirteen and forty weeks ended November 28, 2004, respectively.



Retirement Program for Canadian Employees. United Agri Products Canada, Inc., (UAP Canada) one of our subsidiaries, currently has two retirement plans for employees of UAP Canada. They are eligible to participate
in these plans after completing one year of service. One plan is an optional RRSP/DPSD Defined Contribution plan. UAP Canada matches 50% of an employees first 6% of contributions to the plan.



The second plan is a Defined Benefit plan. UAP Canada is responsible for funding this plan
and is currently contributing at a rate of 7.10% of payroll. Benefits are based on years of credited service and average compensation in the last 5 years of service. Components of the UAP Canada pension plan are reported below.



13



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The change in pension benefit costs is as follows:



|                                                   |                   |                        |     |                   |                                         |   |     |                                    |  |   |     |   |  |   |      |  
|-------------------------------------------------- | ----------------- | ---------------------- | --- | ----------------- | --------------------------------------- | - | --- | ---------------------------------- |  | - | --- | - |  | - | ---- | -
|Pension benefit costs                              |                   | Thirteen Weeks Ended   |     |                   | Thirty-NineWeeks EndedNovember 27, 2005 |   |     | FortyWeeks Ended November 28, 2004 | 
|                                                   | November 27, 2005 |                        |     | November 28, 2004 |                                         |   |    
|                                                   |                   | (dollars in thousands) |    
|Service cost for benefits earned during the period |                   | $                      | 68  |                   |                                         | $ | 107 |                                    |  | $ | 231 |   |  | $ | 321  |  
|Interest cost on benefit obligations               |                   |                        | 35  |                   |                                         |   | 51  |                                    |  |   | 117 |   |  |   | 153  |  
|Assumed return on plan assets                      |                   |                        | (28 | )                 |                                         |   | (47 | )                                  |  |   | (94 | ) |  |   | (140 | )
|                                                   |                   |                        |     |                   |                                         |   |     |                                    |  |   |     |   |  |   |      |  
|Total pension benefit costs                        |                   | $                      | 75  |                   |                                         | $ | 111 |                                    |  | $ | 254 |   |  | $ | 334  |  
|                                                   |                   |                        |     |                   |                                         |   |     |                                    |  |   |     |   |  |   |      |  



|10. | Equity
|--- | ------



Stock Options. The changes in the outstanding stock options under our two stock option plans during the thirty-nine weeks ended November 27, 2005, and the forty weeks ended November 28, 2004,
are summarized below:



|                             |  |                         |   |  |                                          |     
|---------------------------- |  | ----------------------- | - |  | ---------------------------------------- | ----
|Stock options                |  | Shares subject tooption |   |  | Weighted-averageExercise price per share
|Balance at February 27, 2005 |  | 3,359,535               |   |  | $                                        | 2.56
|Granted                      |  |                        |   |  |                                          |     
|Exercised                    |  | (38,977                 | ) |  | $                                        | 2.56
|Forfeited / lapsed           |  | (138,205                | ) |  | $                                        | 2.56
|                             |  |                         |   |  |                                          |     
|Balance at November 27, 2005 |  | 3,182,353               |   |  | $                                        | 2.56
|                             |  |                         |   |  |                                          |     
|Vested at November 27, 2005  |  | 2,662,837               |   |  | $                                        | 2.56
|                             |  |                         |   |  |                                          |     
|Balance at February 22, 2004 |  | 2,789,115               |   |  | $                                        | 2.56
|Granted                      |  | 629,047                 |   |  | $                                        | 2.56
|Exercised                    |  |                        |   |  |                                          |     
|Forfeited / lapsed           |  |                        |   |  |                                          |     
|                             |  |                         |   |  |                                          |     
|Balance at November 28, 2004 |  | 3,418,162               |   |  | $                                        | 2.56
|                             |  |                         |   |  |                                          |     
|Vested at November 28, 2004  |  | 2,589,627               |   |  | $                                        | 2.56
|                             |  |                         |   |  |                                          |     



Deferred Compensation
Plans. We maintain two deferred compensation plans for the benefit of certain members of management, the 2003 Deferred Compensation Plan (the 2003 DCP), which was adopted in connection with the Acquisition and the 2004 Deferred
Compensation Plan (the 2004 DCP), which was adopted on April 2, 2004. The 2003 DCP provides for the crediting of deferred shares for each executive who entered into a retention agreement at the time of the Acquisition. The 2004 DCP
provides for the crediting of deferred shares for each member of management who waived the right to receive a portion of their cash bonus for the 2004 fiscal year. Each deferred share represents the right to receive one share of common stock on the
applicable payment date, subject to adjustment in the event of a stock split or similar event affecting UAP Holding Corp.s common stock. Deferred shares become payable upon a termination of the executives employment, certain changes in
control of UAP Holding Corp. and certain offerings of UAP Holding Corp.s common stock (based upon certain piggyback rights contained in the Management Incentive Agreement). The plans prohibit the assignment of the deferred shares except upon
an executives death. The company established a trust (the Rabbi Trust) to hold the assets of the 2003 DCP and the 2004 DCP. The assets of the Rabbi Trust are subject to the claims of the companys creditors in the event of the
companys insolvency.



As of November 27, 2005, there were 1,765,924
shares of our common stock remaining in the Rabbi Trust. The shares of common stock held by the Rabbi Trust are issued and outstanding, and therefore participate in dividends and are included in the calculation of the weighted average share
computation.



Dividends Declared and Paid. On October 6,
2005, our board of directors declared a quarterly dividend on our common stock in the amount of $0.1625 per share. The record date for the dividend payment was November 15, 2005, and the payment date was December 1, 2005. We paid a $0.125
per share dividend on June 1, 2005 and a $0.1625 per share dividend on September 1, 2005.



14



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Long-Term Incentive Plan. During the thirteen weeks ended November 27, 2005, no restricted stock units
(RSUs) were granted to eligible employees and management pursuant to our 2004 Long-Term Incentive Plan. A total of 249,575 RSUs have been granted and 18,925 RSUs have been forfeited in the thirty-nine weeks ended
November 27, 2005. There were 230,650 RSUs outstanding at November 27, 2005. The RSUs vest ratably over four years, 25% on each of the four anniversaries of the grant date. We recorded $0.2 million and $0.6 million as
compensation expense for the thirteen and thirty-nine week periods ended November 27, 2005.



On April 29, 2005, our board of directors adopted a directors deferred compensation plan (the Director DCP). The Director DCP allows our non-employee directors to elect to defer payment of all or a
portion of their fees and have such amounts credited under the plan in the form of deferred shares. Our board of directors (or its compensation committee) may also grant our non-employee directors deferred shares under the Director DCP. Each
deferred share represents the right to receive one share of common stock on the applicable payment date, subject to adjustment in the event of a stock split or similar event affecting UAP Holding Corp.s common stock. Deferred shares become
payable immediately upon termination of the directors service. Shares delivered under the Director DCP in respect of an award of deferred shares are charged against the share limits of our 2004 Long-Term Incentive Plan. The Director DCP
prohibits the assignment of the deferred shares except upon a directors death. There were no restricted stock units outstanding under the Director DCP as of November 27, 2005.



Preferred Stock. Upon consummation of the Common Stock Offering, we eliminated the Series A Redeemable Preferred Stock in its
entirety. As of November 28, 2004, the outstanding amount of Series A Redeemable Preferred Stock of $16.5 million included $1.3 million of accrued dividends.



|11. | Business Segment and Related Information
|--- | ----------------------------------------



We operate in one segment. Net sales and long-lived assets by geographical area are as follows:



|              |                   |                        |                   |                                         |   |                                   |  |   |           |  |   |          
|------------- | ----------------- | ---------------------- | ----------------- | --------------------------------------- | - | --------------------------------- |  | - | --------- |  | - | ---------
|Net sales     |                   | Thirteen Weeks Ended   |                   | Thirty-NineWeeks EndedNovember 27, 2005 |   | FortyWeeks EndedNovember 28, 2004
|              | November 27, 2005 |                        | November 28, 2004 |                                         |  
|              |                   | (dollars in thousands)
|United States |                   | $                      | 311,536           |                                         | $ | 261,036                           |  | $ | 2,361,386 |  | $ | 2,164,069
|Canada        |                   |                        | 11,553            |                                         |   | 6,121                             |  |   | 76,072    |  |   | 65,558   
|              |                   |                        |                   |                                         |   |                                   |  |   |           |  |   |          
|Total         |                   | $                      | 323,089           |                                         | $ | 267,157                           |  | $ | 2,437,458 |  | $ | 2,229,627
|              |                   |                        |                   |                                         |   |                                   |  |   |           |  |   |          



Net sales by geographical area are
based on the location of the facility producing the sales.



|                  |  |                        |         |                   |   |                   |  |   |        
|----------------- |  | ---------------------- | ------- | ----------------- | - | ----------------- |  | - | -------
|Long-lived assets |  | November 27, 2005      |         | February 27, 2005 |   | November 28, 2004
|                  |  | (dollars in thousands)
|United States     |  | $                      | 176,484 |                   | $ | 178,056           |  | $ | 171,620
|Canada            |  |                        | 4,033   |                   |   | 4,098             |  |   | 4,492  
|                  |  |                        |         |                   |   |                   |  |   |        
|Total             |  | $                      | 180,517 |                   | $ | 182,154           |  | $ | 176,112
|                  |  |                        |         |                   |   |                   |  |   |        



Long-lived assets consist of property,
plant and equipment net of depreciation, goodwill, intangible assets net of amortization, deferred income taxes, debt issuance costs net of amortization, investment in unconsolidated affiliates, and other assets. Long-lived assets by geographical
area are based on the location of our facilities.



Net sales by product
category are as follows:



|                              |                   |                        |                   |                                         |   |                                    |  |   |           |  |   |          
|----------------------------- | ----------------- | ---------------------- | ----------------- | --------------------------------------- | - | ---------------------------------- |  | - | --------- |  | - | ---------
|Net sales by product category |                   | Thirteen Weeks Ended   |                   | Thirty-NineWeeks EndedNovember 27, 2005 |   | FortyWeeks Ended November 28, 2004
|                              | November 27, 2005 |                        | November 28, 2004 |                                         |  
|                              |                   | (dollars in thousands)
|Chemicals                     |                   | $                      | 180,229           |                                         | $ | 158,869                            |  | $ | 1,474,224 |  | $ | 1,416,590
|Fertilizer                    |                   |                        | 112,867           |                                         |   | 85,149                             |  |   | 596,138   |  |   | 494,418  
|Seed                          |                   |                        | 14,940            |                                         |   | 14,482                             |  |   | 313,909   |  |   | 274,453  
|Other                         |                   |                        | 15,053            |                                         |   | 8,657                              |  |   | 53,187    |  |   | 44,166   
|                              |                   |                        |                   |                                         |   |                                    |  |   |           |  |   |          
|Total                         |                   | $                      | 323,089           |                                         | $ | 267,157                            |  | $ | 2,437,458 |  | $ | 2,229,627
|                              |                   |                        |                   |                                         |   |                                    |  |   |           |  |   |          



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|12. | Subsequent Events
|--- | -----------------



On January 5, 2006, our board declared a quarterly dividend on our common stock in the amount of $0.1875 per share. The record date for the dividend payment will be February 15, 2006, and the payment date
will be March 1, 2006.



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##### Table of Contents

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



On November 29, 2004, UAP Holding Corp. consummated the initial public offering of its common stock (the Common Stock
Offering), which consisted of a primary offering of 3,125,000 shares of common stock by UAP Holding Corp. and a secondary offering of 28,428,125 shares of UAP Holding Corp.s common stock by UAP Holding Corp.s equity sponsor and
certain members of its management (collectively, the selling stockholders).



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



The purpose of this section is to discuss and analyze our consolidated financial condition, liquidity and capital resources and results
of operations for the periods presented. You should read this analysis in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report. The results of operations for the thirteen and
thirty-nine weeks ended November 27, 2005, are not necessarily indicative of the results to be expected for other interim periods or for the full fiscal year. This section should also be read in conjunction with our Annual Report on Form 10-K
for the fiscal year ended February 27, 2005.



Overview



We operate in the highly competitive agricultural inputs distribution
industry. Our principal competitors in the distribution of crop production inputs include agricultural cooperatives, national fertilizer producers, major grain companies and independent distributors and brokers. We, along with other agricultural
input distributors, represent the main route-to-market for agricultural input manufacturers, and fill a critical need in the U.S. and Canadian agricultural input markets by allowing suppliers to economically access a highly fragmented customer base
of growers, dealers and non-crop customers.



The three primary product areas of
the agricultural and non-crop input markets are chemicals, seed, and fertilizer. Our industry in general is affected by a number of factors including but not limited to, cost to distribute products, customer financial condition, local and national
laws and regulations, economic conditions, employment, inflation, political climate, interest rates, fuel prices and weather patterns.



Our business depends on farm expenditures for crop inputs, which in turn is dependent upon planted acreage in the United States and Canada. Over the last ten years, the
market for agricultural inputs has grown 3% per year, and planted acreage has been virtually flat, leading to a relatively stable but very competitive industry for crop inputs. Our opportunities within the industry will include the use of our
national distribution network to further participate in the growing seed market, grow fertilizer volumes as we extend that product offering to existing customers, continue to expand our private label lines of seed and chemicals and continue to look
for more efficiencies in expenses and working capital.



Background



We market a comprehensive line of products including chemicals, seed, and
fertilizer to growers and regional dealers. In addition to our product offering, we provide a broad array of value-added services including crop management, biotechnology advisory services, custom blending, inventory management and custom
applications of crop inputs. The products and services we offer are critical to growers because they lower the overall cost of crop production and improve crop quality and yield. As a result of our broad scale and scope, we provide leading
agricultural input companies with an efficient means to access a highly fragmented customer base of farmers and growers.



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



| |  |  | Leveraging our scale;
| | - |  | ---------------------



| |  |  | Expanding our presence in seed, fertilizer, branded and non-crop products; and
| | - |  | ------------------------------------------------------------------------------



| |  |  | Targeting continued margin enhancement and working capital management.
| | - |  | ----------------------------------------------------------------------



17



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Recent Initiatives



Improving our Nationwide Network. One of our key initiatives is to grow our business by leveraging our size and leading market share across North America.
We study our market share by state, county, and customer, and develop sales initiatives at a local and regional level to address any gaps and opportunities we have in our network on chemical, seed, and fertilizer. Where our data indicates an
opportunity, we have the potential to add sales personnel and/or locations and assets to fill in gaps in our coverage. We have addressed the non-crop markets with a focused management team, and have made modifications to our sales coverage and asset
base in those markets.



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



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



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



Key factors affecting results of
operations for the thirteen weeks ended November 27, 2005



During the
third quarter of fiscal 2006, several events took place that had or may have an impact on our business.



| |  |  | We achieved or believe that it is probable that we will achieve several crop year program goals with our major chemical vendors which allowed us to increase our rebate income
accrual for the third quarter by an estimated amount of approximately $19.8 million compared with the prior year. See the discussion in Critical Accounting Policies and Estimates on page 25 for further discussion of this item.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Hurricanes Katrina and Rita have impacted all industries in numerous ways. The agricultural distribution industry has seen an impact on several fronts. During our third quarter,
following the hurricanes, the prices of diesel fuel and gasoline spiked to record high levels. While the prices of diesel fuel and gasoline have recently come down from their peaks, we experienced a 45% increase in our fuel expenses, or $1.4
million, on comparable gallons during the third quarter, compared to last year. For the first three quarters our total fuel expenses are higher by 31%, or $3.5 million, compared to last year. Natural gas prices have also increased dramatically due
to supply issues caused by the hurricanes. Natural gas is a key ingredient in the manufacturing of nitrogen based fertilizers. These fertilizers such as anhydrous ammonia, urea and UAN solutions have seen dramatic price increases per ton. The high
price of natural gas has caused several domestic fertilizer manufacturers to shut down certain production facilities until prices for their main ingredient come down. However, to date no significant supply issues have occurred.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On September 19, 2005, we announced a restructuring of our organization and management. As part of this restructuring, we consolidated ten of our regional
distribution organizations into five. We also closed one regional finance center, further centralizing and consolidating various accounting and administrative functions. As part of this restructuring, approximately 120 employees located throughout
the United States were terminated. Expenses
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18



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##### Table of Contents

| | related to this restructuring for the quarter totaled $1.0 million. We estimate that $0.9 million remains to be expensed before this restructuring is
completed in the first quarter of fiscal year 2007.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Also during the third quarter of fiscal 2006, we substantially completed the expansion of our fertilizer terminal in Quincy, Illinois. We expect this Mississippi River terminal to
contribute to our goal of increased fertilizer sales to our existing and new customers because of its additional capacity and strategic location to the Midwestern corn-belt. This facility expansion was first identified as an opportunity through a
gaps analysis of our existing fertilizer distribution network.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Please review the section Results of Operations below for a more detailed explanation of our financial and operational performance.



RESULTS OF OPERATIONS



Analysis of Condensed Consolidated Statements of Earnings



|                                                           |  |                                               |         |   |                   |   |         |                                           |  |       |                                     |  |   |                |   |  |   |           |   |  |       |  
|---------------------------------------------------------- |  | --------------------------------------------- | ------- | - | ----------------- | - | ------- | ----------------------------------------- |  | ----- | ----------------------------------- |  | - | -------------- | - |  | - | --------- | - |  | ----- | -
|                                                           |  | Thirteen Weeks Ended                          |         |   | PercentChange     |   |         | Thirty-Nine Weeks Ended November 27, 2005 |  |       | Forty Weeks Ended November 28, 2004 |  |   | Percent Change |  
|                                                           |  | November 27, 2005                             |         |   | November 28, 2004 |   |         |                                           |  |      
|                                                           |  | (dollars in thousands, except per share data) |        
|Net Sales                                                  |  | $                                             | 323,089 |   |                   | $ | 267,157 |                                           |  | 20.9  | %                                   |  | $ | 2,437,458      |   |  | $ | 2,229,627 |   |  | 9.3   | %
|Cost of goods sold                                         |  |                                               | 272,547 |   |                   |   | 249,835 |                                           |  | 9.1   | %                                   |  |   | 2,107,891      |   |  |   | 1,969,549 |   |  | 7.0   | %
|                                                           |  |                                               |         |   |                   |   |         |                                           |  |       |                                     |  |   |                |   |  |   |           |   |  |       |  
|Gross profit                                               |  |                                               | 50,542  |   |                   |   | 17,322  |                                           |  | 191.8 | %                                   |  |   | 329,567        |   |  |   | 260,078   |   |  | 26.7  | %
|Selling, general and administrative expenses               |  |                                               | 56,301  |   |                   |   | 54,186  |                                           |  | 3.9   | %                                   |  |   | 216,362        |   |  |   | 207,578   |   |  | 4.2   | %
|(Gain) loss on sale of assets                              |  |                                               | (59     | ) |                   |   | 642     |                                           |  | 109.2 | %                                   |  |   | (1,532         | ) |  |   | (623      | ) |  | 145.9 | %
|Restructuring Costs                                        |  |                                               | 970     |   |                   |   | 857     |                                           |  | 13.2  | %                                   |  |   | 1,460          |   |  |   | 857       |   |  | 70.4  | %
|Royalties, service charges and other (income) and expenses |  |                                               | (2,915  | ) |                   |   | (6,073  | )                                         |  | -52.0 | %                                   |  |   | (20,739        | ) |  |   | (18,847   | ) |  | 10.0  | %
|                                                           |  |                                               |         |   |                   |   |         |                                           |  |       |                                     |  |   |                |   |  |   |           |   |  |       |  
|Operating income (loss)                                    |  |                                               | (3,755  | ) |                   |   | (32,290 | )                                         |  | 88.4  | %                                   |  |   | 134,016        |   |  |   | 71,113    |   |  | 88.5  | %
|Third party interest expense                               |  |                                               | 10,885  |   |                   |   | 11,683  |                                           |  | -6.8  | %                                   |  |   | 28,179         |   |  |   | 33,766    |   |  | -16.5 | %
|Finance related and other charges                          |  |                                               |        |   |                   |   | 7,903   |                                           |  | NM    |                                     |  |   |               |   |  |   | 11,653    |   |  | NM    |  
|                                                           |  |                                               |         |   |                   |   |         |                                           |  |       |                                     |  |   |                |   |  |   |           |   |  |       |  
|Income (loss) before income taxes                          |  |                                               | (14,640 | ) |                   |   | (51,876 | )                                         |  | 71.8  | %                                   |  |   | 105,837        |   |  |   | 25,694    |   |  | 311.9 | %
|Income tax expense (benefit)                               |  |                                               | (5,292  | ) |                   |   | (20,954 | )                                         |  | 74.7  | %                                   |  |   | 42,490         |   |  |   | 9,298     |   |  | 357.0 | %
|                                                           |  |                                               |         |   |                   |   |         |                                           |  |       |                                     |  |   |                |   |  |   |           |   |  |       |  
|Net income (loss)                                          |  | $                                             | (9,348  | ) |                   | $ | (30,922 | )                                         |  | 69.8  | %                                   |  | $ | 63,347         |   |  | $ | 16,396    |   |  | 286.4 | %
|                                                           |  |                                               |         |   |                   |   |         |                                           |  |       |                                     |  |   |                |   |  |   |           |   |  |       |  
|Basic earnings (loss) per share                            |  | $                                             | (0.19   | ) |                   | $ | (0.65   | )                                         |  | 70.8  | %                                   |  | $ | 1.26           |   |  | $ | 0.35      |   |  | 260.0 | %
|Diluted earnings (loss) per share                          |  | $                                             | (0.19   | ) |                   | $ | (0.65   | )                                         |  | 70.8  | %                                   |  | $ | 1.21           |   |  | $ | 0.33      |   |  | 266.7 | %
|NM = Not Meaningful                                        |  |                                               |         |   |                   |   |         |                                           |  |       |                                     |  |   |                |   |  |   |           |   |  |       |  
|Effective tax rate                                         |  |                                               | 36.1    | % |                   |   | 40.4    | %                                         |  |       |                                     |  |   | 40.1           | % |  |   | 36.2      | % |  |       |  
|Comparison as a Percent of Net Sales:                      |  |                                               |         |   |                   |   |         |                                           |  |       |                                     |  |   |                |   |  |   |           |   |  |       |  
|Gross profit                                               |  |                                               | 15.6    | % |                   |   | 6.5     | %                                         |  |       |                                     |  |   | 13.5           | % |  |   | 11.7      | % |  |       |  
|Selling, general and administrative expenses               |  |                                               | 17.4    | % |                   |   | 20.3    | %                                         |  |       |                                     |  |   | 8.9            | % |  |   | 9.3       | % |  |       |  
|Operating income (loss)                                    |  |                                               | -1.2    | % |                   |   | -12.1   | %                                         |  |       |                                     |  |   | 5.5            | % |  |   | 3.2       | % |  |       |  
|Income (loss) before income taxes                          |  |                                               | -4.5    | % |                   |   | -19.4   | %                                         |  |       |                                     |  |   | 4.3            | % |  |   | 1.2       | % |  |       |  
|Net income (loss)                                          |  |                                               | -2.9    | % |                   |   | -11.6   | %                                         |  |       |                                     |  |   | 2.6            | % |  |   | 0.7       | % |  |       |  



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Thirteen Weeks Ended November 27, 2005, Compared to Thirteen Weeks Ended November 28, 2004



Net Sales. Sales increased to $323.1 million in the thirteen weeks ended
November 27, 2005, compared to $267.2 million for the thirteen weeks ended November 28, 2004.



Sales of chemicals increased to $180.2 million in the thirteen weeks ended November 27, 2005, from $158.9 million in the thirteen weeks ended November 28, 2004. Increased sales of herbicides (including
glyphosate products), insecticides, and plant growth regulators were offset by lower fungicide sales. More specifically, shipments of Monsanto bulk herbicides increased compared to last year. These sales were transitioned from commissioned agent to
direct invoice transactions during the third quarter of fiscal 2005. Higher volumes of glyphosate herbicides more than offset lower end user unit prices for glyphosate products. Sales of fertilizer increased to $112.9 million in the thirteen weeks
ended November 27, 2005, from $85.1 million in the thirteen weeks ended November 28, 2004. The increase was due to both higher per ton pricing as well as an increase in volumes sold. Sales of seed increased to $14.9 million in the thirteen
weeks ended November 27, 2005, from $14.5 million in the thirteen weeks ended November 28, 2004. The increase was primarily due to increased sales of wheat, rye, and alfalfa seeds offset by lower sales of grass seed in our non-crop markets
compared to last year. Sales of other products increased to $15.1 million in the thirteen weeks ended November 27, 2005, from $8.7 million in the thirteen weeks ended November 28, 2004, primarily due to an increase in application fees and
additional transportation revenue from our Canadian and Northern Plains locations.



Cost of Goods Sold. Cost of goods sold was $272.5 million in the thirteen weeks ended November 27, 2005, compared to $249.8 million in the thirteen weeks ended November 28, 2004. Gross profit (net sales less cost of
goods sold) was $50.5 million in the thirteen weeks ended November 27, 2005, compared to $17.3 million in the thirteen weeks ended November 28, 2004. Gross margin (gross profit as a percentage of net sales) was 15.6% in the thirteen weeks
ended November 27, 2005, compared to 6.5% in the thirteen weeks ended November 28, 2004. The increase in gross profit dollars and gross margin percentage was primarily due to higher rebate income, and improved upfront margins in chemical,
seed, application and other categories. Our fertilizer gross margin percentage was down slightly compared to last year due to higher per ton prices which diluted our gross margin percentage on higher fertilizer sales and gross profit dollars
compared to last year. During the third quarter of fiscal 2006, we achieved several crop year program goals with our major chemical vendors. This, along with other factors, allowed us to increase our rebate income accrual in the third quarter of
fiscal year 2006 by an estimated amount of approximately $19.8 million compared to the same period last year, the majority of which would have occurred in our fourth quarter. The increases in gross profit were partly offset by higher supply chain
expenses. Significantly higher prices for fuel compared to last year lead to higher costs on internal and third party freight. Our supplier rebates are accrued monthly based on actual sales at the most likely estimated rates by supplier, then
finalized and adjusted as necessary, typically in the third or fourth quarter. See the discussion in Critical Accounting Policies and Estimates on page 25 for further discussion of the factors which led to a higher level of rebates being
accrued in the third quarter of 2006 as compared to the same quarter last year.



Selling, General and Administrative Expenses. Selling, general and administrative (SG&A) expenses increased to $56.3 million in the thirteen weeks ended November 27, 2005, from $54.2 million in the thirteen weeks
ended November 28, 2004. SG&A expenses were 17.4% of sales during the thirteen weeks ended November 27, 2005, down from 20.3% of sales during the thirteen weeks ended November 28, 2004. The dollar increase in expenses was due to
higher personnel costs and professional expenses associated with being an independent public company as well as increased insurance and fuel expenses compared to the thirteen weeks ended November 28, 2004. We experienced a 45% increase in
combined gasoline and fuel expenses on comparable gallons used during the thirteen weeks ended November 27, 2005, resulting in a $1.4 million increase compared to last year. The SG&A expenses for the thirteen weeks ended November 28,
2004 include $0.3 million of management fees paid to Apollo Management.



Restructuring Costs. Restructuring costs for the thirteen weeks ended November 27, 2005, were $1.0 million compared to $0.9 million in the thirteen weeks ended November 28, 2004. The restructuring costs that occurred
during the third quarter of fiscal 2006 were severance expenses and contract termination costs associated with our management reorganization and administrative consolidation announced on September 19, 2005. The restructuring costs that occurred
in the third quarter of fiscal 2005 were made up of severance and other associated costs with the closure of two formulation facilities.



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Royalties, Service Charges and Other Income and Expenses. These items include royalty income generated by
our proprietary products group, service charge income paid by customers who do business with us on terms, and equity earnings in an unconsolidated subsidiary, as well as other items. Other income decreased to $2.9 million in the thirteen weeks ended
November 27, 2005, from $6.1 million in the thirteen weeks ended November 28, 2004. Higher equity earnings from an unconsolidated subsidiary were offset by lower royalty and customer service charge income during the thirteen weeks ended
November 27, 2005, compared to the thirteen weeks ended November 28, 2004. Royalties decreased during the quarter compared to last year due to the timing of our royalty income, some of which was recognized in the first and second quarters
of this fiscal year. While our accounts receivable balance due from customers has increased due to higher sales this year, our income generated from customer service charges is lower due to an overall improvement in the age of those receivables
which remain due.



Third Party Interest Expense. Interest expense
decreased $0.8 million to $10.9 million in the thirteen weeks ended November 27, 2005, from $11.7 million for the thirteen weeks ended November 28, 2004. The decrease was due to interest incurred in the prior year but not the current year
on preferred stock redeemed in October and November 2004, and interest relating to $21.5 million of 81/4% Senior Notes which were redeemed in December 2004.



Finance Related and Other Charges. There were no finance related and other
charges during the thirteen weeks ended November 27, 2005. Finance related and other charges for the thirteen weeks ended November 28, 2004, were $7.9 million, consisting of $6.0 million in fees and expenses from an abandoned offering of
income deposit securities which was expensed last year in the third quarter and $1.9 million in transition services agreement expenses with ConAgra Foods related to the Acquisition.



Income Taxes. The effective income tax rate was 36.1% for the thirteen weeks ended November 27, 2005, versus 40.4% for
the thirteen weeks ended November 28, 2004. We file our fiscal year end income tax return during the third quarter. The lower relative tax benefit for the quarters loss was principally caused by the effects of truing up estimated tax
return provisions of prior years when our fiscal year income tax returns were filed. These changes in estimate were a $0.4 million charge during the thirteen weeks ended November 27, 2005, as compared to a $0.9 million benefit during the
thirteen weeks ended November 28, 2004.



Thirty-Nine Weeks Ended
November 27, 2005, Compared to Forty Weeks Ended November 28, 2004



Net Sales. Sales increased to $2,437.5 million in the thirty-nine weeks ended November 27, 2005, compared to $2,229.6 million for the forty weeks ended November 28, 2004. Sales of proprietary chemical and seed
products were 14.5% of total chemical and seed sales in the thirty-nine weeks ended November 27, 2005, compared to 14.2% for the forty weeks ended November 28, 2004, reflecting our strategy to grow sales of proprietary products.



Sales of chemicals increased to $1,474.2 million in the thirty-nine weeks
ended November 27, 2005, from $1,416.6 million in the forty weeks ended November 28, 2004. Share gains in the Midwest, Texas, the Midsouth and the Southeast, helped overcome lower non-crop sales and slightly lower chemical tolling revenue
due to the closing of two non-strategic formulation facilities that had provided toll-manufacturing services. Also, we now bill directly Monsanto bulk herbicides, which during the first two quarters of fiscal 2005 were commissioned agent
transactions. Higher volumes of glyphosate herbicides more than offset lower end user unit prices for glyphosate products, while insecticide and fungicide treatments were up compared to last year due to an increase in disease and insect
infestations. Sales of fertilizer increased to $596.1 million in the thirty-nine weeks ended November 27, 2005, from $494.4 million in the forty weeks ended November 28, 2004. The increase was due to higher pricing, on slightly higher
volumes compared with last year. The small growth in our fertilizer volumes is due to lower in season applications as a result of higher prices, offset by higher early season fertilizer applications that normally occur in the fall and winter but
were delayed into the spring due to wet weather. Sales of seed increased to $313.9 million in the thirty-nine weeks ended November 27, 2005, from $274.5 million in the forty weeks ended November 28, 2004. The increase was due primarily to
sales growth on both third party and proprietary brands and higher prices due to increased sales of seed with enhanced traits. Sales of other products increased to $53.2 million in the thirty-nine weeks ended November 27, 2005, from $44.2
million in the forty weeks ended November 28, 2004, due to an increase in application fees and additional transportation revenue from our Canadian and Northern Plains locations.



Cost of Goods Sold. Cost of goods sold was $2,107.9 million in the thirty-nine weeks ended November 27, 2005, compared to
$1,969.5 million in the forty weeks ended November 28, 2004. Gross profit (net sales less cost of goods sold) was $329.6 million in the thirty-nine weeks ended November 27, 2005, compared to $260.1 million in the forty weeks ended
November 28, 2004. Gross margin (gross profit as a percentage of net sales) was 13.5% in the thirty-nine weeks ended November 27, 2005, compared to 11.7% in the forty weeks ended November 28, 2004. The increase in gross profit and
gross



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margin was due partially to an increase in cost of sales of $17.4 million in the forty weeks ended November 28, 2004, resulting from purchase accounting
for the Acquisition. At the Acquisition, the inventory on our books was written up $21.1 million to fair market value. As this inventory was sold, it increased cost of sales by $17.4 million in the forty weeks ended November 28, 2004. During
the third quarter of fiscal 2006, we achieved several crop year program goals with our major chemical vendors. This, along with other factors, allowed us to increase our year to date rebate income accrual compared to the same period last year by an
estimated amount of approximately $15.4 million. The remaining increase in gross profit was primarily due to growth in seed and fertilizer sales, and growth in insecticide and fungicide sales. These gains were partially offset by some erosion in the
profitability of glyphosate herbicides and plant growth regulators. Gross profit includes supplier rebates, which are accrued monthly based on actual sales at the most likely estimated rates by supplier, then adjusted as necessary, typically in our
third or fourth quarter. See the discussion in Critical Accounting Policies and Estimates on page 25 for further discussion of the factors which led to a higher level of rebates being accrued in through the third quarter of 2006 as
compared to the same period last year.



Selling, General and
Administrative Expenses. Selling, general and administrative (SG&A) expenses increased to $216.4 million in the thirty-nine weeks ended November 27, 2005, from $207.6 million in the forty weeks ended November 28, 2004. SG&A
expenses decreased slightly to 8.9% of sales during the thirty-nine weeks ended November 27, 2005, down from 9.3% of sales during the forty weeks ended November 28, 2004. The dollar increase in expenses was due to higher personnel costs
and professional expenses associated with becoming an independent public company, higher insurance costs, fewer recoveries of bad debt, and increased vehicle expenses including fuel. These increases were partially offset by having one less week of
operating expenses in the thirty-nine weeks ended November 27, 2005. The SG&A expenses for the forty weeks ended November 28, 2004 include $0.8 million of management fees paid to Apollo Management.



Restructuring Costs. Restructuring costs for the thirty-nine weeks ended
November 27, 2005, were $1.5 million compared to $0.9 million in the forty weeks ended November 28, 2004. The restructuring costs related to fiscal 2006 are made up of severance expenses and contract termination costs associated with our
management reorganization and administrative consolidation announced on September 19, 2005, as well as contract termination costs and other associated costs with the closure of two formulation facilities. The restructuring costs occurring in
fiscal year 2005 were made up of severance and other associated costs with the closure of two formulation facilities.



Royalties, Service Charges and Other Income and Expenses. These items include royalty income generated by our proprietary products group, service charge
income paid by customers who do business with us on terms, and equity earnings in an unconsolidated subsidiary, as well as other items. Other income increased to $20.7 million in the thirty-nine weeks ended November 27, 2005, from $18.8 million
in the forty weeks ended November 28, 2004. The increase was due to higher royalty income during the thirty-nine weeks ended November 27, 2005, slightly offset by a gain on a post closing settlement of an acquisition during the forty weeks
ended November 28, 2004. Higher royalties are a result of the market success of those products from which we receive royalty payments. Additionally, lower service charge income, due to an overall improved accounts receivable portfolio, was
partially offset by increased equity earnings in an unconsolidated subsidiary as compared to last year.



Third Party Interest Expense. Interest expense decreased $5.6 million to $28.2 million in the thirty-nine weeks ended November 27, 2005, compared to $33.8 million for the forty weeks ended
November 28, 2004. The forty weeks ended November 28, 2004, included interest expense on preferred stock redeemed in October and November 2004 and interest relating to $21.5 million of the 81/4% Senior Notes
redeemed in December 2004, and $1.9 million of interest paid to ConAgra Foods for the acquisition. Interest expense on the revolving credit facility decreased by $0.9 million during the thirty-nine weeks ended November 27, 2005, compared to the
forty weeks ended November 28, 2004. The impact of lower average daily revolving balances was partially offset by rising interest rates over the last thirty-nine weeks compared to the prior year.



Finance Related and Other Charges. There were no finance related and other
charges during the thirty-nine weeks ended November 27, 2005. Finance related and other charges for the forty weeks ended November 28, 2004, were $11.7 million. These charges for the forty weeks ended November 28, 2004, consist of
$6.0 million in fees and expenses from an abandoned offering of income deposit securities which was expensed last year in the third quarter and $5.7 million in transition services agreement expenses with ConAgra Foods related to the Acquisition.



Income Taxes. The effective income tax rate was 40.1% for the
thirty-nine weeks ended November 27, 2005, versus 36.2% for the forty weeks ended November 28, 2004. We file our fiscal year end income tax return during the third quarter. Adjustments of our fiscal 2004 and 2005 income tax provisions,
which are based in part on estimates, to the actual filed tax returns was the principal cause of the change in tax rates for the thirty-nine weeks ended November 27, 2005, and the forty weeks ended November 28, 2004. These changes in
estimate were a $0.4 million charge during the three quarters ended November 27, 2005, as compared to a $0.9 million benefit during the three quarters ended November 28, 2004.



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LIQUIDITY AND CAPITAL RESOURCES



Overview



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



We believe that our cash flows from operating activities and borrowing capabilities under our revolving credit facility will be sufficient
to meet our liquidity requirements in the foreseeable future, including funding of capital expenditures, debt service payments, and our intended dividend payments on our common stock. If our cash flows from operating activities are insufficient to
fund dividend payments at intended levels, we will need to reduce or eliminate dividends or, to the extent we are permitted to do so under our debt agreements, fund dividends with borrowings or from other sources. If we use working capital or
permanent borrowings to fund dividends, we will have less cash available for future dividends and other purposes, which could negatively impact our financial condition, our results of operations and our ability to maintain or expand our business.
Additionally, our revolving credit facility will mature in 2008. If we are unable to refinance such indebtedness prior to its stated maturity, we will be required to use cash to repay such indebtedness, and we may not have sufficient cash available
to us at that time. Even if we have sufficient cash, such a repayment would sufficiently decrease the amount of cash, if any, that is available to pay dividends.



Cash Flows



Cash flows used in operating activities totaled $169.2 million in the thirty-nine weeks ended November 27, 2005, compared to $276.1 million in the forty weeks ended
November 28, 2004. The improvement in net cash used in operating activities in the current period versus the prior period is due primarily to the improvement in net income of $47.0 million, better overall payment terms from suppliers, and a
change in the timing of prepayments to chemical and seed suppliers. We made larger prepayments to chemical and seed suppliers in the fourth quarter of fiscal 2005, reducing payment obligations to such suppliers in the thirty-nine weeks ended
November 27, 2005. However, in the fourth quarter of fiscal 2004, we decided not to make significant prepayments to suppliers. Instead, we primarily paid on regular trade terms during the forty weeks ended November 28, 2004, resulting in
more payments to suppliers. This was partially offset by higher trade receivables from increased sales and higher inventories. Inventories were up due to higher levels of fungicide products and higher fertilizer inventory levels resulting from
increased fertilizer costs per ton.



Cash flows used in investing activities
totaled $7.6 million for the thirty-nine weeks ended November 27, 2005, and $64.7 million for the forty weeks ended November 28, 2004. Additions to property, plant and equipment were $10.2 million in the thirty-nine weeks ended
November 27, 2005, compared to $9.4 million in the forty weeks ended November 28, 2004. Capital spending during the thirty-nine weeks ended November 27, 2005 was for a variety of projects; the largest was related to a fertilizer
terminal expansion project. During the forty weeks ended November 28, 2004, the company made the final acquisition payment to ConAgra Foods for $58.2 million.



Cash flows provided by financing activities were $141.9 million in the thirty-nine weeks ended November 27, 2005, compared to $170.2
million in the forty weeks ended November 28, 2004. Cash flows provided by financing activities reflect borrowings under our revolving credit facility used to accommodate our seasonal working capital needs. We actively manage our cash balances
which results in check float on zero balance accounts. The net change in float was $8.1 million and $16.8 million for the periods ending November 27, 2005, and November 28, 2004, respectively. Dividends paid to common stockholders were
$14.5 million for the thirty-nine weeks ended November 27, 2005 compared to $40.0 million paid in the forty weeks ended November 28, 2004.



Credit Facility. At November 27, 2005, there was $486.9 million of borrowing availability under the revolving credit facility and United Agri Products,
Inc. had borrowing capacity of $464.4 million after giving effect to $22.5 million of letters of credit under the sub-facility. At November 27, 2005, we had $149.0 million in short-term debt outstanding under our revolving credit facility
compared to an outstanding balance of $211.6 million at November 28, 2004.



Since inception of the credit facility, we have been in compliance with its financial covenants. During the fifty-two weeks ended November 27, 2005, outstanding borrowings (net of cash on hand) reached a period end peak of $276.3
million on October 23, 2005, while cash on hand reached a period end peak of $57.6 million on August 28, 2005. Our average period



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end borrowings (net of cash on hand) for the fifty-two week period ended November 27, 2005, were approximately $36.6 million.



Obligations and Commitments



As part of our ongoing operations, we enter into arrangements that obligate us to make
future payments under contracts such as lease agreements, debt agreements and unconditional purchase obligations (i.e., obligations to transfer funds in the future for fixed or minimum quantities of goods or services at fixed or minimum prices, such
as take-or-pay contracts). We enter into unconditional purchase obligation arrangements in the normal course of business to ensure that adequate levels of sourced product are available to us. There were no material changes outside the
ordinary course of business during the thirteen or thirty-nine weeks ended November 27, 2005.



Holding Company



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



Dividend Policy



Currently we intend to pay quarterly cash dividends on our common stock at an annual rate of
$0.75 per share. On January 5, 2006, our board declared a quarterly dividend on our common stock in the amount of $0.1875 per share. The record date for the dividend payment will be February 15, 2006, and the payment date will be
March 1, 2006. On October 6, 2005, our board declared a quarterly dividend on our common stock in the amount of $0.1625 per share. The record date for the dividend payment was November 15, 2005, and the payment date was
December 1, 2005. We paid a $0.125 dividend per share on June 1, 2005 and a $0.1625 dividend per share on September 1, 2005.



There are no assurances that we will declare or pay any cash dividends in the future. The declaration and payment of future dividends to holders of our common stock is at
the discretion of our board of directors and depends upon many factors, including our financial condition, earnings, legal requirements, restrictions in our debt agreements and other factors our board of directors deems relevant. The terms of our
indebtedness, including the revolving credit facility and the indentures governing the 81/4% Senior Notes and the 103/4% Senior Discount Notes, may also restrict us from paying
cash dividends on our common stock under some circumstances. As of November 27, 2005, management believes approximately $46 million of permitted distributions were available to pay dividends under our restricted payment covenant in our
indenture governing the 103/4% Senior Discount Notes before giving effect to the December 1, 2005 dividend payment of $8.2 million.



Cash flow provided by our operating activities is highly variable due to the seasonality of
our business, resulting in negative cash flow during certain periods. Because of the variability, if our cash flows from operating activities are insufficient to fund dividend payments at intended levels, we may need to reduce or eliminate dividends
or, to the extent permitted by our debt agreements, fund all or part of the dividends with additional debt or other sources of cash. To the extent we pay dividends, the amount of cash available to us to pay the principal and interest on our
outstanding debt will be reduced. A failure to pay the principal or interest on our debt would constitute an event of default under the applicable debt agreements, giving the holders of the debt the right to accelerate its maturity. If any of our
debt is accelerated, we may not have sufficient cash available to repay it in full and we may be unable to refinance it on satisfactory terms or at all. An event of default under debt agreements, or an acceleration of the debt, could also trigger an
event of default under other debt agreements. Furthermore, if we fund dividends with additional debt, our interest expense will increase, which may cause a further reduction in the amount of cash available to us. Subject to certain restrictions in
the indentures governing the 81/4% Senior Notes and the 103/4% Senior Discount Notes, additional debt could be secured and therefore effectively be senior to the 81/4% Senior Notes and the 103/4% Senior Discount Notes.



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CRITICAL ACCOUNTING POLICIES AND ESTIMATES



Our financial statements and accompanying notes are prepared in accordance with U.S. GAAP. The process of preparing financial statements
requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results could differ from these estimates, and changes in these estimates are recorded when known. The
estimates and assumptions performed by management are based on our historical experiences combined with managements understanding of current facts and circumstances. Certain of our accounting policies are considered critical as they are both
material to the portrayal of our financial condition and results of operations and require significant or complex judgment on the part of management. The critical judgments by management relate to the allowance for doubtful accounts, inventory
valuation, impairment of long-lived assets, goodwill and intangible assets and earnings from vendor rebate programs. There has been no material change in accounting policies considered critical by our management. However we have refined our
methodology for estimating chemical rebates earned in response to changes in supplier rebate programs through the use of an internally developed tracking system. Under GAAP, rebates are recorded when it is probable that we will earn the rebate, the
amount is reasonably estimable and the rebate is covered by a written agreement with the supplier. Due to a combination of factors as compared to last year  changes in vendor programs, our new rebate tracking system, and improvements in
operating performance that have led to greater probability of achieving higher rebate levels we have accrued more rebate earnings in and through the third quarter of 2006 as compared to the same periods in 2005, which has partially contributed
to our improved operating results. Decisions as to when and how much rebate earnings should be recorded are estimates, which require significant judgment by management, based on an analysis of vendor programs (especially those with tiered levels of
rebates which can be earned), operating performance to date, and expectations of operating performance for the balance of the crop year, all of which can vary from year-to-year. Because the probable and reasonably estimable
concepts imply that a relatively high level of assurance should exist before accruing rebates, true-ups of rebate accruals, if required, will tend to be positive. Where uncertainty exists such that the rebate is not reasonably estimated or probable,
rebates are recognized as the related milestones are achieved. Given our operating cycle and the crop-year basis of all significant rebate programs, true-ups of rebate accruals, if required, usually occur in the third or fourth quarter of the year.
During fiscal 2006, significant true-ups were made in the third quarter, as compared to the fourth quarter in fiscal 2005. As a result, we expect that our fourth quarter operating results this year will not be as strong as the same period in fiscal
2005.



Forward-Looking Statements



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



These risks and certain other uncertainties are discussed in more detail in our Annual Report on Form 10-K for the fiscal year ended February 27, 2005 under the
caption Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsRisk Factors.



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



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



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



Our average period end borrowings under the revolving credit agreement (net of cash on hand)
for the fifty-two week period ended November 27, 2005, were approximately $36.6 million. The revolving credit facility is affected by changes in interest rates. Based upon the amount of our average period end borrowings (net of cash on hand)
for the fifty-two week period ended November 27, 2005, a one percentage point change in the assumed weighted average interest rate on such credit facility would change our annual interest expense by $0.4 million.



Our foreign currency risk is limited primarily to the exchange rate differential in the
Canadian and US dollar. The exchange rate was 0.8553, 0.8074, and 0.8483, at November 27, 2005, February 27, 2005, and November 28, 2004, respectively. The exchange rate has been between 0.7851 and 0.8658 for the thirty-nine
weeks ended November 27, 2005. A 1% change in the exchange rate has approximately a $0.4 million impact on the balance sheet value.



Changes in energy prices have a direct impact on our fuel costs. The national average per gallon price of diesel fuel has increased from approximately $2.12 to $2.48 and
gasoline has increased from $1.90 to $2.13 as of November 28, 2004 and November 27, 2005, respectively. These price increases impact our supply chain and selling expenses. Based on our usage mix of these two fuels, we estimate that on
average we have experienced nearly a 31% increase in fuel prices year over year through the third quarter. Based on our historic usage, a $0.15 increase in the annual average per gallon price of fuel would increase our fuel expense by $1.0 million.
Higher fuel prices also affect our customers such that higher expenses for fuel and higher prices for fertilizer inputs may reduce the cash or credit available to our customers with which they purchase other inputs or services from us.



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Our on hand inventory of fertilizer products has price risk related to changes in energy prices. Our total fertilizer
inventories on hand were approximately $104.1 million, $120.5 million and $80.1 million as of November 27, 2005, February 27, 2005 and November 28, 2004, respectively. Of our total fertilizer inventory approximately $45.5
million, $64.1 million and $44.6 million as of November 27, 2005, February 27, 2005 and November 28, 2004 were considered by the fertilizer industry to be nitrogen based and therefore price sensitive to the price of natural gas.
Natural gas is the key ingredient in the manufacture of these products. While a direct relationship cannot be established due to alternative sources of fertilizer products, such as imports, or substitute products, price risk does exist.



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



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



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



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



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PART II. OTHER INFORMATION



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



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



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



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SIGNATURES



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



Date: January 10, 2006



UAP HOLDING CORP.(Registrant)By:

/s/ David W. BullockDavid W. BullockExecutive Vice President and Chief Financial Officer(Principal Financial Officer and duly authorized signatory on behalf of Registrant)




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