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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from
                to                .
 Commission file number 333-84486
 Land OLakes, Inc.
 (Exact name of Registrant as Specified in Its Charter)
 Minnesota
    
    41-0365145(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)4001 Lexington Avenue NorthArden Hills, Minnesota
    
    55112(Address of Principal Executive Offices)
    
    (Zip Code)
 (651) 481-2222  (Registrants Telephone Number, Including Area Code)
 Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
 o þ
 þ o
 o þ
   Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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INDEX
 PART I.Forward Looking Statements
    
    
    3Item 1.
    
    Business
    
    
    3Business Segments
    
    
    3Description of the Cooperative
    
    
    10Item 1A.
    
    Risk Factors
    
    
    16Item 1B.
    
    Unresolved Staff Comments
    
    
    25Item 2.
    
    Properties
    
    
    26Item 3.
    
    Legal Proceedings
    
    
    27Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    28PART II.Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    28Item 6.
    
    Selected Financial Data
    
    
    28Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    33Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    60Item 8.
    
    Financial Statements and Supplementary Data
    
    
    61Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    61Item 9A.
    
    Controls and Procedures
    
    
    62Item 9B.
    
    Other Information
    
    
    63PART III.Item 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    64Item 11.
    
    Executive Compensation
    
    
    68Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    86Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    86Item 14.
    
    Principal Accountant Fees and Services
    
    
    86PART IV.Item 15.
    
    Exhibits, Financial Statement Schedules
    
    
    87Signatures
    
    
    90EX-3.1EX-10.8EX-10.33EX-12EX-18EX-21EX-31.1EX-31.2EX-32.1EX-32.2
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FORWARD-LOOKING STATEMENTS
  Website
 www.landolakesinc.com.
 
 PART I
 
 Item 1. Business.
  Overview
  
 Business Segments
  Dairy Foods
 Overview. LAND O
LAKES, Indian Maiden Alpine Lace, New
Yorker.
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Products.
 Butter. LAND O LAKES
 Spreads. LAND O LAKES
 Cheese. LAND O LAKES, Alpine Lace New Yorker LAND O LAKES
 Other.
 Raw Milk Wholesaling.
 New Products. LAND O LAKES
 Sales, Marketing and Advertising.
   Distribution.
 Production.
 -4-




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Supply and Raw Materials.
 Customers.
 Research and Development.
 Competition.
 Feed
 Overview. Purina, Chow Checkerboard Nine Square LAND O LAKES Lake Country
  Products.
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Complete Feed. Purina, Chow Checkerboard Nine Square
 Supplements.
 Premixes.
 Simple Blends.
 Milk Replacers. Maxi Care, Cows Match Amplifier Max
 Ingredient Merchandising.
 Sales, Marketing and Advertising.
 Distribution.
 Production.
 Supply and Raw Materials.
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Customers.
 Research and Development.
 Competition. Purina, Chow Checkerboard Nine Square
 Seed
 Overview. CROPLAN
GENETICS Asgrow,
DEKALB and NK,
 Products.
 Sales, Marketing and Advertising. CROPLAN GENETICS NK, Asgrow DEKALB, WinField Solutions AgriSolutions CROPLAN GENETICS® , Seed Solutions
 -7-




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Distribution.
 Supply and Production.
 Customers.
 Research and Development.
 Competition. Answer Plot® Expert Seller
 Agronomy
 Overview. WinField
 Products. AgriSolutions Origin
 Sales, Marketing and Advertising.
 Production, Source of Supply and Raw Materials.
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Customers.
 Distribution.
 Research and Development.
 Competition.
 Layers
 Overview.
 Products. LAND O LAKES All-Natural Farm Fresh Eggs Egglands Best
 Customers and Distribution.
 Sales and Marketing. LAND O LAKES
 Competition.
 Other
  -9-




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Joint Ventures and Investments
  Agriliance LLC
  Agronomy Company of Canada Ltd.
  Advanced Food Products, LLC
  CoBank ACB
  Ag Processing Inc
  
 Description of the Cooperative
  -10-




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Structure and Membership
       Governance
  -11-




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Earnings
  Patronage Income and Equity
          -12-




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Employees
  Patents, Trademarks and Intellectual Property
  LAND O LAKES, Indian Maiden Alpine Lace, New Yorker, Extra Melt Maxi Care,
Amplifier Max, Cows Match, Omolene, CROPLAN GENETICS, AgriSolutions, Origin, WinField Solutions MoArk. LAND O
LAKES, Indian Maiden Maxi Care, Cows Match Amplifier Max, LAND O LAKES EGGLANDS BEST. Purina, Chow Checkerboard Nine Square
 LAND O
LAKES Indian Maiden Grip n Go
   -13-




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Environmental Matters
      Regulatory Matters
  -14-




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-15-




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Item 1A. Risk Factors.
         -16-




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®
     -17-




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
    
    evolving consumer preferences and nutritional and health-related concerns; and
    
    changes in food distribution channels, such as consolidation of the supermarket industry and
other retail outlets that result in a smaller customer base and intensify the competition for fewer
customers.
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
    
    restrictions on our ability to transfer our ownership interest in the joint venture;
    
    no right to receive distributions without the unanimous consent of the members of the joint venture; and
    
    non-competition arrangements restricting our ability to engage independently in the
same line of business as the joint
venture.
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
    
    we will be required to use a portion of our cash flow from operations to pay principal and
interest on our debt, thereby reducing the availability of our cash flow to fund working capital,
capital expenditures, strategic acquisitions, investments and alliances and other general corporate
requirements;
    
    our interest expense could increase if interest rates in general increase because a portion
of our debt bears interest at floating rates;
    
    our leverage could increase our vulnerability to general economic downturns and adverse
competitive and industry conditions and could place us at a competitive disadvantage compared to
our competitors who are less leveraged;
    
    our debt service obligations could limit our flexibility to plan for, or react to, changes
in our business and the dairy and agricultural industries;
    
    our level of debt may restrict us from raising additional financing on satisfactory terms to
fund working capital, capital expenditures, strategic acquisitions, investments and joint ventures
and other general corporate requirements;
    
    our level of debt may prevent us from raising the funds necessary to repurchase all of our 8
3/4% senior notes and the 9% senior secured notes tendered to us upon the occurrence of a change of
control, which would constitute an event of default under the 8 3/4% senior notes and the 9% senior
secured notes; and
    
    our failure to comply with the financial and other restrictive covenants in our debt
instruments could result in an event of default that, if not cured or waived, could cause our debt
to become due immediately and permit our lenders to enforce their remedies.
   -21-




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
    
    had assets of $1,281 million or 26% of our total assets as of December 31, 2008;
    
    had liabilities of $1,046 million or 27% of our total liabilities as of December 31, 2008
(after excluding the $190.7 million of Capital Securities, see Description of capital securities
from the consolidated total liabilities); and
    
    generated net sales of $968 million or 8% of our consolidated net sales for the year ended
December 31, 2008.
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LAND O LAKES Indian Maiden
  Purina, Chow Checkerboard Nine Square
  Purina, Chow Checkerboard Nine Square Purina, Chow Checkerboard Nine Square
   -23-




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
    
    tampering by unauthorized third parties;
    
    product contamination (such as listeria, e. coli. and salmonella) or spoilage;
    
    the presence of foreign objects, substances, chemicals, and other agents;
    
    residues introduced during the growing, storage, handling or transportation phases; or
    
    improperly formulated products which either do not contain the proper mixture of ingredients
or which otherwise do not have the proper attributes.
 LAND O LAKES
     -24-




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Item 1B. Unresolved Staff Comments.
  -25-




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Item 2. Properties.
  Total Number
    
    Total Numberof Facilities
    
    of FacilitiesBusiness Segment
    
    Owned
    
    Leased
    
    Regional Location of FacilitiesDairy Foods
    
    
    10
    (1)
    
    
    3
    
    
    Midwest(2)  8
West(3)  2
East(4)  3
South(5)  0Feed
    
    
    96
    (6)
    
    
    46
    
    
    Midwest  71
West  35
East  12
South 24Seed
    
    
    17
    
    
    
    6
    
    
    Midwest  14
West  9Agronomy
    
    
    41
    
    
    
    78
    
    
    Midwest  76
West  23
East  7
South  13Layers
    
    
    21
    
    
    
    29
    
    
    Midwest  11
West  27
East  11
South  1
 
 (1)
    
    Includes a non edible foods manufacturing facility.(2)
    
    The Midwest region includes the states of Ohio, Michigan, Indiana, Illinois, Wisconsin,
Minnesota, Iowa, Missouri, Oklahoma, Kansas, Nebraska, South Dakota and North Dakota and
Ontario, Canada.(3)
    
    The West region includes the states of Montana, Wyoming, Colorado, Texas, New Mexico,
Arizona, Utah, Idaho, Washington, Oregon, Nevada, California, Alaska and Hawaii.(4)
    
    The East region includes the states of Maine, New Hampshire, Vermont, New York,
Massachusetts, Rhode Island, Connecticut, Pennsylvania, New Jersey, Delaware and Maryland.(5)
    
    The South region includes the states of West Virginia, Virginia, North Carolina, Kentucky,
Tennessee, South Carolina, Georgia, Florida, Alabama, Mississippi, Louisiana and Arkansas.(6)
    
    Includes 7 closed facilities.  -26-




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Item 3. Legal Proceedings.
  ® ® ® ® ®
     -27-




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Adam Properties, Inc. v. Michael Foods, Inc. et al. Bemus Point Inn, Inc. v. United Egg Producers, Inc., et al. Brigiottas Farmland Produce and Garden Center, Inc., et al. Country Foods v.
Hillandale Farms of Pa., Inc., et al. Eby-Brown Company, LLC v. United Egg
Producers, Inc., et al. Eggology, Inc. v. United Egg Producers, Inc., et al. Goldberg and Solovy Foods, Inc. v. United Egg Producers, Inc., et al. John A. Lisciandro v. United Egg Producers, et al. Julius Silvert, Inc. v. Golden
Oval Eggs LLC, et al. Karetas Foods, Inc. v. Cal-Maine Foods, Inc., et al. Nussbaum  SF, Inc. v. United Egg Producers, Inc., et al. Oasis
Foods Company v. Michael Foods, Inc., et al. Pilar M. DeCastro & Co., Inc., et al.
v. Cal-Maine Foods, Inc., et al. SensoryEffectsFlavor Co. v. United Egg Producers,
Inc., et al. Sicilian Chefs, Inc. v. Michael Foods, Inc., et al. Somerset Industries, Inc. v. Cal-Maine Foods, Inc., et al. The Egg Store, Inc. v.
United Egg Producers, Inc., et al. T.K. Ribbings Family Restaurant v. United Egg
Producers, et al. Williams v. United Egg Producers, Inc., et al. Wixon,
Inc. v. United Egg Producers, Inc., et al. Zaza, Inc. v. Michael Foods, Inc.; et al. Zeqiri Corp v. Golden Oval Eggs, LLC, et al.
 
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 PART II
 
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters.
        
 Item 6. Selected Financial Data.
  -28-




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Years Ended December 31,Restated2008
    
    
    2007 (13)
    
    
    2006 (13)
    
    
    2005 (13)
    
    
    2004 (13)($ in Millions)Statement of Operations Data:Net sales
    
    $
    12,039.3
    
    
    $
    8,924.9
    
    
    $
    7,102.3
    
    
    $
    7,336.1
    
    
    $
    7,497.3Cost of sales
    
    
    11,084.0
    
    
    
    8,160.3
    
    
    
    6,443.5
    
    
    
    6,750.7
    
    
    
    6,902.3Gross profit
    
    
    955.3
    
    
    
    764.6
    
    
    
    658.8
    
    
    
    585.4
    
    
    
    595.0Selling, general and administrative
    
    
    756.6
    
    
    
    623.5
    
    
    
    516.5
    
    
    
    496.4
    
    
    
    499.6Restructuring and impairment charges(1)
    
    
    2.9
    
    
    
    4.0
    
    
    
    40.5
    
    
    
    6.4
    
    
    
    7.8Gain on insurance settlement
    
    
    (10.6
    )
    
    
    (5.9
    )
    
    
    
    
    
    
    
    
    
    
    Earnings from operations
    
    
    206.4
    
    
    
    143.0
    
    
    
    101.8
    
    
    
    82.6
    
    
    
    87.6Interest expense, net
    
    
    63.2
    
    
    
    49.6
    
    
    
    59.1
    
    
    
    78.1
    
    
    
    81.2Other (income) expense, net(2)
    
    
    (12.0
    )
    
    
    (37.1
    )
    
    
    (17.4
    )
    
    
    9.4
    
    
    
    (3.3
    )Gain on sale of investment in CF Industries, Inc(3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (102.5
    )
    
    
    Loss on impairment of investment in CF Industries, Inc(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36.5Equity in earnings of affiliated companies
    
    
    (35.0
    )
    
    
    (68.2
    )
    
    
    (13.7
    )
    
    
    (41.3
    )
    
    
    (62.2
    )Minority interest in earnings of subsidiaries
    
    
    16.1
    
    
    
    1.5
    
    
    
    1.5
    
    
    
    1.4
    
    
    
    1.6Earnings before income taxes and discontinued operations
    
    
    174.1
    
    
    
    197.2
    
    
    
    72.3
    
    
    
    137.5
    
    
    
    33.8Income tax expense
    
    
    14.5
    
    
    
    36.3
    
    
    
    2.9
    
    
    
    7.5
    
    
    
    3.1Net earnings from continuing operations
    
    
    159.6
    
    
    
    160.9
    
    
    
    69.4
    
    
    
    130.0
    
    
    
    30.7Earnings (loss) from discontinued operations, net of
income taxes(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.1
    
    
    
    (6.7
    )Net earnings
    
    $
    159.6
    
    
    $
    160.9
    
    
    $
    69.4
    
    
    $
    132.1
    
    
    $
    24.0
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Years Ended December 31,Restated2008
    
    2007 (13)
    
    2006 (13)
    
    2005 (13)
    
    2004 (13)($ in Millions)Other Financial Data:Depreciation and amortization
    
    $
    91.8
    
    
    $
    85.6
    
    
    $
    97.1
    
    
    $
    99.5
    
    
    $
    105.8Unrealized hedging (losses) gains(6)
    
    
    (51.9
    )
    
    
    12.9
    
    
    
    7.6
    
    
    
    5.3
    
    
    
    (23.1
    )Capital expenditures
    
    
    171.3
    
    
    
    91.1
    
    
    
    83.8
    
    
    
    70.4
    
    
    
    96.1Cash patronage paid to members(7)
    
    
    29.1
    
    
    
    20.4
    
    
    
    24.0
    
    
    
    15.1
    
    
    
    11.4Equity revolvement paid to members(8)
    
    
    68.5
    
    
    
    37.6
    
    
    
    56.6
    
    
    
    53.6
    
    
    
    23.2
 Years Ended December 31,Restated2008
    
    2007 (13)
    
    2006 (13)
    
    2005 (13)
    
    2004 (13)($ in Millions)Balance Sheet Data (at end of period):Cash and cash equivalents
    
    $
    30.8
    
    
    $
    116.8
    
    
    $
    79.7
    
    
    $
    179.7
    
    
    $
    73.1Restricted cash(9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20.3Working capital(10)
    
    
    729.8
    
    
    
    459.0
    
    
    
    292.1
    
    
    
    255.8
    
    
    
    312.2Property, plant and equipment, net
    
    
    658.3
    
    
    
    565.3
    
    
    
    679.4
    
    
    
    676.0
    
    
    
    712.7Total assets
    
    
    4,981.3
    
    
    
    4,419.2
    
    
    
    3,000.4
    
    
    
    3,032.3
    
    
    
    3,165.5Total debt(11)
    
    
    753.5
    
    
    
    531.5
    
    
    
    492.0
    
    
    
    531.1
    
    
    
    881.4Capital securities of trust subsidiary
    
    
    190.7
    
    
    
    190.7
    
    
    
    190.7
    
    
    
    190.7
    
    
    
    190.7Minority interests
    
    
    18.9
    
    
    
    6.2
    
    
    
    8.8
    
    
    
    35.2
    
    
    
    38.5Total equities
    
    
    976.9
    
    
    
    1,014.3
    
    
    
    917.8
    
    
    
    896.1
    
    
    
    844.3
 Years Ended December 31,Restated2008
    
    2007
    
    2006
    
    2005
    
    2004($ in Millions)Selected Segment Financial Information:Dairy FoodsNet sales
    
    $
    4,136.4
    
    
    $
    4,176.8
    
    
    $
    3,241.3
    
    
    $
    3,684.1
    
    
    $
    3,797.3Earnings from operations
    
    
    25.0
    
    
    
    80.6
    
    
    
    68.0
    
    
    
    31.3
    
    
    
    37.0Depreciation and amortization
    
    
    31.5
    
    
    
    26.3
    
    
    
    40.0
    
    
    
    41.2
    
    
    
    39.6Capital expenditures
    
    
    84.8
    
    
    
    18.0
    
    
    
    19.4
    
    
    
    20.5
    
    
    
    53.1FeedNet sales
    
    
    3,857.4
    
    
    
    3,061.6
    
    
    
    2,711.4
    
    
    
    2,586.9
    
    
    
    2,626.6Earnings from operations
    
    
    27.9
    
    
    
    56.0
    
    
    
    60.6
    
    
    
    61.4
    
    
    
    12.8Depreciation and amortization
    
    
    32.0
    
    
    
    27.8
    
    
    
    30.7
    
    
    
    32.0
    
    
    
    38.5Capital expenditures
    
    
    54.3
    
    
    
    42.2
    
    
    
    33.6
    
    
    
    25.9
    
    
    
    26.3SeedNet sales
    
    
    1,185.0
    
    
    
    917.0
    
    
    
    756.0
    
    
    
    653.9
    
    
    
    518.8Earnings from operations
    
    
    27.4
    
    
    
    39.1
    
    
    
    39.3
    
    
    
    30.5
    
    
    
    19.9Depreciation and amortization
    
    
    2.4
    
    
    
    2.4
    
    
    
    2.5
    
    
    
    2.3
    
    
    
    2.5Capital expenditures
    
    
    3.0
    
    
    
    2.0
    
    
    
    2.7
    
    
    
    2.4
    
    
    
    1.6Agronomy(12)Net sales
    
    
    2,335.3
    
    
    
    287.4
    
    
    
    
    
    
    
    
    
    
    
    Earnings (loss) from operations
    
    
    126.2
    
    
    
    (48.2
    )
    
    
    (13.1
    )
    
    
    (27.6
    )
    
    
    (12.8
    )Depreciation and amortization
    
    
    14.7
    
    
    
    8.5
    
    
    
    6.1
    
    
    
    6.1
    
    
    
    6.1Capital expenditures
    
    
    4.5
    
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    Layers(13)Net sales
    
    
    606.2
    
    
    
    513.9
    
    
    
    398.4
    
    
    
    407.0
    
    
    
    541.3Earnings (loss) from operations
    
    
    22.9
    
    
    
    22.4
    
    
    
    (49.3
    )
    
    
    (12.2
    )
    
    
    29.4Depreciation and amortization
    
    
    9.2
    
    
    
    9.5
    
    
    
    10.6
    
    
    
    10.5
    
    
    
    9.3Capital expenditures
    
    
    18.3
    
    
    
    5.1
    
    
    
    11.0
    
    
    
    17.7
    
    
    
    8.9Other/EliminationsNet sales
    
    
    (81.1
    )
    
    
    (31.9
    )
    
    
    (4.7
    )
    
    
    4.3
    
    
    
    13.2(Loss) earnings from operations
    
    
    (22.9
    )
    
    
    (6.9
    )
    
    
    (3.7
    )
    
    
    (0.8
    )
    
    
    1.3Depreciation and amortization
    
    
    2.0
    
    
    
    11.1
    
    
    
    7.2
    
    
    
    7.4
    
    
    
    9.7Capital expenditures
    
    
    6.4
    
    
    
    23.4
    
    
    
    17.0
    
    
    
    4.0
    
    
    
    6.2
  -30-




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NOTES TO SELECTED FINANCIAL DATA
  Years Ended December 31,Restated2008
    
    
    2007
    
    
    2006 (13)
    
    
    2005
    
    
    2004($ in millions)Restructuring charges
    
    $
    1.8
    
    
    $
    0.5
    
    
    $
    1.5
    
    
    $
    0.3
    
    
    $
    2.4Impairment of assets
    
    
    1.1
    
    
    
    3.5
    
    
    
    39.0
    
    
    
    6.1
    
    
    
    5.4Total
    
    $
    2.9
    
    
    $
    4.0
    
    
    $
    40.5
    
    
    $
    6.4
    
    
    $
    7.8
    Years Ended December 31,Restated2008
    
    
    2007
    
    
    2006 (13)
    
    
    2005
    
    
    2004($ in millions)(Gain) loss on divestiture of businesses
    
    $
    
    
    
    $
    (28.5
    )
    
    $
    (7.6
    )
    
    $
    
    
    
    $
    2.7Gain on sale of investments, excluding CF Industries, Inc.
    
    
    (7.4
    )
    
    
    (8.7
    )
    
    
    (8.0
    )
    
    
    (1.1
    )
    
    
    (0.6
    )Gain on foreign currency exchange contracts
    
    
    (4.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of intangibles
    
    
    
    
    
    
    
    
    
    
    (1.8
    )
    
    
    
    
    
    
    (Gain) loss on extinguishment of debt
    
    
    (0.4
    )
    
    
    
    
    
    
    
    
    
    
    11.0
    
    
    
    Gain on legal settlements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.6
    )
    
    
    (5.4
    )Total
    
    $
    (12.0
    )
    
    $
    (37.2
    )
    
    $
    (17.4
    )
    
    $
    9.3
    
    
    $
    (3.3
    )
      Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004($ in millions)20% required for tax deduction
    
    $
    19.7
    
    
    $
    13.4
    
    
    $
    16.4
    
    
    $
    11.0
    
    
    $
    7.9Discretionary
    
    
    9.4
    
    
    
    7.0
    
    
    
    7.6
    
    
    
    4.1
    
    
    
    3.5Total
    
    $
    29.1
    
    
    $
    20.4
    
    
    $
    24.0
    
    
    $
    15.1
    
    
    $
    11.4
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Years Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004($ in millions)RevolvementDairy Foods(a)
    
    $
    10.7
    
    
    $
    13.9
    
    
    $
    17.0
    
    
    $
    17.1
    
    
    $
    19.9Ag Services
    
    
    57.8
    
    
    
    23.7
    
    
    
    39.6
    
    
    
    36.5
    
    
    
    3.3Total
    
    $
    68.5
    
    
    $
    37.6
    
    
    $
    56.6
    
    
    $
    53.6
    
    
    $
    23.2
 
 (a)
    
    Includes the distribution of a portion of the equity issued in connection with
the acquisition of Dairymans Cooperative Creamery Association for the years ended 2004
through 2006.      Years Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004($ in Millions)Statement of Operations Data:Gross profit  as previously reported
    
    $
    767.2
    
    
    $
    660.9
    
    
    $
    585.0
    
    
    $
    593.7Adjustments
    
    
    (2.6
    )
    
    
    (2.1
    )
    
    
    0.4
    
    
    
    1.3Gross profit  as adjusted
    
    $
    764.6
    
    
    $
    658.8
    
    
    $
    585.4
    
    
    $
    595.0Restructuring and impairment charges  as
previously reported
    
    $
    4.0
    
    
    $
    21.2
    
    
    $
    6.4
    
    
    $
    7.8Adjustments
    
    
    
    
    
    
    19.3
    
    
    
    
    
    
    
    Restructuring and impairment charges  as adjusted
    
    $
    4.0
    
    
    $
    40.5
    
    
    $
    6.4
    
    
    $
    7.8Earnings from operations  as previously reported
    
    $
    147.0
    
    
    $
    124.2
    
    
    $
    83.7
    
    
    $
    84.9Adjustments
    
    
    (4.0
    )
    
    
    (22.4
    )
    
    
    (1.1
    )
    
    
    2.7Earnings from operations  as adjusted
    
    $
    143.0
    
    
    $
    101.8
    
    
    $
    82.6
    
    
    $
    87.6Net earnings  as previously reported
    
    $
    163.8
    
    
    $
    88.9
    
    
    $
    131.8
    
    
    $
    23.7Adjustments
    
    
    (2.9
    )
    
    
    (19.5
    )
    
    
    0.3
    
    
    
    0.3Net earnings  as adjusted
    
    $
    160.9
    
    
    $
    69.4
    
    
    $
    132.1
    
    
    $
    24.0
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Years Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004($ in Millions)Balance Sheet Data (at end of period):Working capital  as previously reported
    
    $
    461.3
    
    
    $
    292.7
    
    
    $
    193.6
    
    
    $
    316.0Adjustments
    
    
    (2.3
    )
    
    
    (0.6
    )
    
    
    62.2
    
    
    
    (3.8
    )Working capital  as adjusted
    
    $
    459.0
    
    
    $
    292.1
    
    
    $
    255.8
    
    
    $
    312.2Goodwill, net  as previously reported
    
    $
    318.2
    
    
    $
    326.5
    
    
    $
    327.1
    
    
    $
    331.6Adjustments
    
    
    (37.3
    )
    
    
    (37.3
    )
    
    
    (29.1
    )
    
    
    (3.0
    )Goodwill, net  as adjusted
    
    $
    280.9
    
    
    $
    289.2
    
    
    $
    298.0
    
    
    $
    328.6Total assets  as previously reported
    
    $
    4,431.8
    
    
    $
    3,014.9
    
    
    $
    3,063.0
    
    
    $
    3,169.0Adjustments
    
    
    (12.6
    )
    
    
    (14.5
    )
    
    
    (30.7
    )
    
    
    (3.5
    )Total assets  as adjusted
    
    $
    4,419.2
    
    
    $
    3,000.4
    
    
    $
    3,032.3
    
    
    $
    3,165.5Total equities  as previously reported
    
    $
    1,032.2
    
    
    $
    932.7
    
    
    $
    891.5
    
    
    $
    840.0Adjustments
    
    
    (17.9
    )
    
    
    (14.9
    )
    
    
    4.6
    
    
    
    4.3Total equities  as adjusted
    
    $
    1,014.3
    
    
    $
    917.8
    
    
    $
    896.1
    
    
    $
    844.3
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 You should read the following discussions of financial condition and results of operations
together with the financial statements and the notes to such statements included elsewhere in this
Form 10-K. This discussion contains forward-looking statements based on current expectations,
assumptions, estimates and projections of our management. These forward-looking statements involve
risks and uncertainties. Actual results could differ materially from those anticipated in these
statements as a result of certain factors, as more fully described in Item 1A. Risk Factors and
elsewhere in this Form 10-K . We undertake no obligation to publicly update any forward-looking
statements.
 Overview
 Segments
  
    
    Dairy Foods produces, markets and sells products such as butter, spreads, cheese and other
dairy related products. Products are sold under well-recognized national brand names
including LAND O LAKES, the Indian Maidenlogo and Alpine Lace, as well as under regional
brand names such as New Yorker.
    
    Feed is largely comprised of the operations of Land OLakes Purina Feed LLC (Land OLakes
Purina Feed), the Companys wholly owned subsidiary. Land OLakes Purina Feed develops,
produces, markets and distributes animal feeds such as ingredient feed, formula feed, milk
replacers, vitamins and additives.
    
    Seed is a supplier and distributor of crop seed products in the United States. A variety
of crop seed is sold, including alfalfa, corn, soybeans and forage and turf grasses.
    
    Agronomy consists primarily of the operations of Winfield Solutions, LLC (Winfield), a
wholly owned subsidiary established in September 2007 upon the distribution of wholesale crop
protection product assets to the Company from Agriliance LLC. Winfield operates primarily as
a wholesale distributor of crop protection products, including herbicides, pesticides,
fungicides and adjuvants. Agronomy also includes the Companys 50% ownership in Agriliance
LLC (Agriliance), which operates retail agronomy distribution businesses.
    
    Layers consists of MoArk, LLC (MoArk), a wholly owned subsidiary. MoArk produces,
distributes and markets shell eggs that are sold to retail and wholesale customers for
consumer and industrial use throughout the United States. MoArk also produced and marketed
liquid egg products prior to the sale of this operation on June 30, 2006.
    
    We also derive a portion of revenues and income from other related businesses, which are
insignificant to our overall results.
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MoArk, LLC Adjustment of Financial Results
    
 Previously
    
    
    
    
    
    
    
    
    
    PreviouslyReported
    
    Effect of
    
    As Adjusted
    
    Reported
    
    Effect of
    
    As Restated2007
    
    Adjustments
    
    2007
    
    2006
    
    Restatements
    
    2006Cost of sales
    
    $
    8,157,684
    
    
    $
    2,622
    
    
    $
    8,160,306
    
    
    $
    6,441,368
    
    
    $
    2,143
    
    
    $
    6,443,511Gross Profit
    
    
    767,211
    
    
    
    (2,622
    )
    
    
    764,589
    
    
    
    660,921
    
    
    
    (2,143
    )
    
    
    658,778Selling, general and administrative
    
    
    622,231
    
    
    
    1,295
    
    
    
    623,526
    
    
    
    515,557
    
    
    
    947
    
    
    
    516,504Restructuring and Impairment
charges
    
    
    3,970
    
    
    
    
    
    
    
    3,970
    
    
    
    21,169
    
    
    
    19,344
    
    
    
    40,513Earnings from operations
    
    
    146,951
    
    
    
    (3,917
    )
    
    
    143,034
    
    
    
    124,195
    
    
    
    (22,434
    )
    
    
    101,761Interest expense
    
    
    48,918
    
    
    
    727
    
    
    
    49,645
    
    
    
    58,360
    
    
    
    698
    
    
    
    59,058Other (income) expense, net
    
    
    (37,157
    )
    
    
    
    
    
    
    (37,157
    )
    
    
    (18,791
    )
    
    
    1,402
    
    
    
    (17,389
    )Earnings before income taxes
    
    
    201,904
    
    
    
    (4,644
    )
    
    
    197,260
    
    
    
    96,851
    
    
    
    (24,534
    )
    
    
    72,317Income tax expense
    
    
    38,107
    
    
    
    (1,776
    )
    
    
    36,331
    
    
    
    7,906
    
    
    
    (4,962
    )
    
    
    2,944Net earnings
    
    
    163,797
    
    
    
    (2,868
    )
    
    
    160,929
    
    
    
    88,945
    
    
    
    (19,572
    )
    
    
    69,373Applied to:Retained earnings
    
    
    61,154
    
    
    
    (2,868
    )
    
    
    58,286
    
    
    
    13,928
    
    
    
    (19,572
    )
    
    
    (5,644
    )
 Other Significant Items
  -34-




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Derivative Commodity Instruments
  December 31,
    
    December 31,
    
    December 31,2008
    
    2007
    
    2006($ in millions)Unrealized hedging (loss) gain
    
    $
    (51.9
    )
    
    $
    12.9
    
    
    $
    7.6
 Vendor Rebates
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Unconsolidated Businesses
  December 31,
    
    December 31,
    
    December 31,2008
    
    2007
    
    2006($ in millions)Equity in earnings from unconsolidated businesses
    
    $
    35.0
    
    
    $
    68.2
    
    
    $
    13.7
    December 31,
    
    December 31,
    
    December 31,2008
    
    2007
    
    2006($ in millions)Agriliance:Investment in Agriliance
    
    $
    176.2
    
    
    $
    150.9
    
    
    $
    105.6Equity in earnings from Agriliance
    
    
    0.1
    
    
    
    50.6
    
    
    
    12.0
  Cooperative Structure
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Wholesaling and Brokerage Activities
    Seasonality
  Dairy and Agricultural Commodity Inputs and Outputs
  Dairy Foods.
  -38-




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##### Table of Contents



December 31,
    
    December 31,
    
    December 31,2008
    
    2007
    
    2006Per pound market price average for year:Butter
    
    $
    1.46
    
    
    $
    1.37
    
    
    $
    1.24Block cheese
    
    
    1.86
    
    
    
    1.76
    
    
    
    1.24Nonfat dry milk (NASS)
    
    
    1.23
    
    
    
    1.69
    
    
    
    0.89
 Feed.
     Layers
 -39-




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##### Table of Contents



Results of Operations  Total Land OLakes, Inc.
 For the Years Ended December 31Restated2008
    
    
    2007
    
    
    2006% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofNet
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    Net$ Amount
    
    
    Sales
    
    
    $ Amount
    
    
    Sales
    
    
    $ Amount
    
    
    Sales($ in millions)Net sales
    
    $
    12,039.3
    
    
    
    100.0
    
    
    $
    8,924.9
    
    
    
    100.0
    
    
    $
    7,102.3
    
    
    
    100.0Cost of sales
    
    
    11,084.0
    
    
    
    92.1
    
    
    
    8,160.3
    
    
    
    91.4
    
    
    
    6,443.5
    
    
    
    90.7Gross profit
    
    
    955.3
    
    
    
    7.9
    
    
    
    764.6
    
    
    
    8.6
    
    
    
    658.8
    
    
    
    9.3Selling, general and administrative
    
    
    756.6
    
    
    
    6.3
    
    
    
    623.5
    
    
    
    7.0
    
    
    
    516.5
    
    
    
    7.3Restructuring and impairment charges
    
    
    2.9
    
    
    
    
    
    
    
    4.0
    
    
    
    
    
    
    
    40.5
    
    
    
    0.6Gain on insurance settlement
    
    
    (10.6
    )
    
    
    (0.1
    )
    
    
    (5.9
    )
    
    
    
    
    
    
    
    
    
    
    Earnings from operations
    
    
    206.4
    
    
    
    1.7
    
    
    
    143.0
    
    
    
    1.6
    
    
    
    101.8
    
    
    
    1.4Interest expense, net
    
    
    63.2
    
    
    
    0.5
    
    
    
    49.6
    
    
    
    0.6
    
    
    
    59.1
    
    
    
    0.8Other income, net
    
    
    (12.0
    )
    
    
    (0.1
    )
    
    
    (37.1
    )
    
    
    (0.4
    )
    
    
    (17.4
    )
    
    
    (0.2
    )Equity in earnings of affiliated companies
    
    
    (35.0
    )
    
    
    (0.3
    )
    
    
    (68.2
    )
    
    
    (0.8
    )
    
    
    (13.7
    )
    
    
    (0.2
    )Minority interest in earnings of subsidiaries
    
    
    16.1
    
    
    
    0.2
    
    
    
    1.5
    
    
    
    
    
    
    
    1.5
    
    
    
    Earnings before income taxes
    
    
    174.1
    
    
    
    1.4
    
    
    
    197.2
    
    
    
    2.2
    
    
    
    72.3
    
    
    
    1.0Income tax expense
    
    
    14.5
    
    
    
    0.1
    
    
    
    36.3
    
    
    
    0.4
    
    
    
    2.9
    
    
    
    Net earnings
    
    $
    159.6
    
    
    
    1.3
    
    
    $
    160.9
    
    
    
    1.8
    
    
    $
    69.4
    
    
    
    1.0
 Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
 Overview of Results
 For the years ended December 31,2008
    
    2007
    
    Decrease($ in millions)Net earnings
    
    $
    159.6
    
    
    $
    160.9
    
    
    $
    (1.3
    )
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For the years ended December 31,2008
    
    2007
    
    Increase($ in millions)Net sales
    
    $
    12,039.3
    
    
    $
    8,924.9
    
    
    $
    3,114.4
  For the years ended December 31,2008
    
    2007
    
    Increase($ in millions)Gross profit
    
    $
    955.3
    
    
    $
    764.6
    
    
    $
    190.7
  For the years ended December 31,2008
    
    2007
    
    Increase($ in millions)Selling, general and administrative expense
    
    $
    756.6
    
    
    $
    623.5
    
    
    $
    133.1
  For the years ended December 31,2008
    
    2007
    
    Decrease($ in millions)Restructuring and impairment charges
    
    $
    2.9
    
    
    $
    4.0
    
    
    $
    (1.1
    )
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For the years ended December 31,2008
    
    2007
    
    Increase($ in millions)Gain on insurance settlement
    
    $
    10.6
    
    
    $
    5.9
    
    
    $
    4.7
   For the years ended December 31,2008
    
    2007
    
    Increase($ in millions)Interest expense, net
    
    $
    63.2
    
    
    $
    49.6
    
    
    $
    13.6
  For the years ended December 31,2008
    
    2007
    
    Decrease($ in millions)Equity in earnings of affiliated companies
    
    $
    35.0
    
    
    $
    68.2
    
    
    $
    (33.2
    )
  For the years ended December 31,2008
    
    2007
    
    Decrease($ in millions)Income tax expense
    
    $
    14.5
    
    
    $
    36.3
    
    
    $
    (21.8
    )
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Net Sales and Gross Profit by Business Segment
  Dairy Foods
 For the Years Ended December 31,2008
    
    2007
    
    %Change($ in millions)Net sales
    
    $
    4,136.4
    
    
    $
    4,176.8
    
    
    
    (1.0
    )%Gross profit
    
    
    213.6
    
    
    
    277.4
    
    
    
    (23.0
    )%Gross profit as a % of sales
    
    
    5.2
    %
    
    
    6.6
    %
 Net Sales Variance
    
    Increase (decrease)($ in millions)Pricing / product mix impact
    
    $
    (40.2
    )Volume impact
    
    
    111.2Acquisitions and divestitures
    
    
    (111.4
    )Total decrease
    
    $
    (40.4
    )
  Gross Profit Variance
    
    Increase (decrease)($ in millions)Margin / product mix impact
    
    $
    (44.3
    )Volume impact
    
    
    2.4Unrealized hedging gains and losses
    
    
    (13.5
    )Acquisitions and divestitures
    
    
    (8.4
    )Total decrease
    
    $
    (63.8
    )
  Feed
 For the Years Ended December 31,2008
    
    2007
    
    % Change($ in millions)Net sales
    
    $
    3,857.4
    
    
    $
    3,061.6
    
    
    
    26.0
    %Gross profit
    
    
    286.5
    
    
    
    299.9
    
    
    
    (4.5
    )%Gross profit as a % of sales
    
    
    7.4
    %
    
    
    9.8
    %
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IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    772.4Volume impact
    
    
    32.4Acquisitions and divestitures
    
    
    (9.0
    )Total increase
    
    $
    795.8
  IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    26.5Volume impact
    
    
    (5.1
    )Unrealized hedging gains and losses
    
    
    (34.9
    )Acquisitions and divestitures
    
    
    0.1Total decrease
    
    $
    (13.4
    )
  Seed
 For the Years Ended December 31,2008
    
    2007
    
    % Change($ in millions)Net sales
    
    $
    1,185.0
    
    
    $
    917.0
    
    
    
    29.2
    %Gross profit
    
    
    116.2
    
    
    
    117.9
    
    
    
    (1.4
    )%Gross profit as a % of sales
    
    
    9.8
    %
    
    
    12.9
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    166.4Volume impact
    
    
    98.8Acquisitions and divestitures
    
    
    2.8Total increase
    
    $
    268.0
  -44-




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IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    0.7Volume impact
    
    
    13.3Unrealized hedging gains and losses
    
    
    (16.4
    )Acquisitions and divestitures
    
    
    0.7Total decrease
    
    $
    (1.7
    )
  Layers
 For the Years Ended December 31,2008
    
    2007
    
    % Change($ in millions)Net sales
    
    $
    606.2
    
    
    $
    513.9
    
    
    
    18.0
    %Gross profit
    
    
    71.2
    
    
    
    77.2
    
    
    
    (7.8
    )%Gross profit as a % of sales
    
    
    11.7
    %
    
    
    15.0
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    92.6Volume impact
    
    
    (0.3
    )Total increase
    
    $
    92.3
  IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    (0.6
    )Volume impact
    
    
    (4.1
    )Unrealized hedging gains and losses
    
    
    (1.3
    )Total decrease
    
    $
    (6.0
    )
  Agronomy
  -45-




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##### Table of Contents



Net Sales
  Gross Profit
  Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Overview of Results
 For the years ended December 31,Restated2007
    
    2006
    
    Increase($ in millions)Net earnings
    
    $
    160.9
    
    
    $
    69.4
    
    
    $
    91.5
   For the years ended December 31,2007
    
    2006
    
    Increase($ in millions)Net sales
    
    $
    8,924.9
    
    
    $
    7,102.3
    
    
    $
    1,822.6
  -46-




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##### Table of Contents



For the years ended December 31,Restated2007
    
    2006
    
    Increase($ in millions)Gross profit
    
    $
    764.6
    
    
    $
    658.8
    
    
    $
    105.8
  For the years ended December 31,Restated2007
    
    2006
    
    Increase($ in millions)Selling, general and administrative expense
    
    $
    623.5
    
    
    $
    516.5
    
    
    $
    107.0
  For the years ended December 31,Restated2007
    
    2006
    
    Decrease($ in millions)Restructuring and impairment charges
    
    $
    4.0
    
    
    $
    40.5
    
    
    $
    (36.5
    )
   For the years ended December 31,2007
    
    2006
    
    Increase($ in millions)Gain on insurance settlement
    
    $
    5.9
    
    
    $
    0.0
    
    
    $
    5.9
  -47-




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##### Table of Contents



For the years ended December 31,Restated2007
    
    2006
    
    Decrease($ in millions)Interest expense, net
    
    $
    49.6
    
    
    $
    59.1
    
    
    $
    (9.5
    )
  For the years ended December 31,2007
    
    2006
    
    Increase($ in millions)Equity in earnings of affiliated companies
    
    $
    68.2
    
    
    $
    13.7
    
    
    $
    54.5
 Overview 
Unconsolidated Businesses
 For the years ended December 31,Restated2007
    
    2006
    
    Increase($ in millions)Income tax expense
    
    $
    36.3
    
    
    $
    2.9
    
    
    $
    33.4
  Net Sales and Gross Profit by Business Segment
  Dairy Foods
 For the Years Ended December 31,2007
    
    2006
    
    %Change($ in millions)Net sales
    
    $
    4,176.8
    
    
    $
    3,241.3
    
    
    
    28.9
    %Gross profit
    
    
    277.5
    
    
    
    239.4
    
    
    
    15.9
    %Gross profit as a % of sales
    
    
    6.6
    %
    
    
    7.4
    %
 -48-




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##### Table of Contents



IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    963.3Volume impact
    
    
    224.5Acquisitions and divestitures
    
    
    (252.3
    )Total increase
    
    $
    935.5
  IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    41.8Volume impact
    
    
    (7.8
    )Unrealized hedging gains and losses
    
    
    (6.4
    )Acquisitions and divestitures
    
    
    10.5Total increase
    
    $
    38.1
  Feed
 For the Years Ended December 31,2007
    
    2006
    
    % Change($ in millions)Net sales
    
    $
    3,061.6
    
    
    $
    2,711.4
    
    
    
    12.9
    %Gross profit
    
    
    299.9
    
    
    
    298.6
    
    
    
    0.4
    %Gross profit as a % of sales
    
    
    9.8
    %
    
    
    11.0
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    552.5Volume impact
    
    
    (153.4
    )Acquisitions and divestitures
    
    
    (48.9
    )Total increase
    
    $
    350.2
  -49-




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##### Table of Contents



IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    24.7Volume impact
    
    
    (21.0
    )Unrealized hedging gains and losses
    
    
    3.6Acquisitions and divestitures
    
    
    (6.0
    )Total increase
    
    $
    1.3
  Seed
 For the Years Ended December 31,2007
    
    2006
    
    % Change($ in millions)Net sales
    
    $
    917.0
    
    
    $
    756.0
    
    
    
    21.3
    %Gross profit
    
    
    117.9
    
    
    
    107.1
    
    
    
    10.1
    %Gross profit as a % of sales
    
    
    12.9
    %
    
    
    14.2
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    60.0Volume impact
    
    
    101.0Total increase
    
    $
    161.0
 ®
 IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    0.3Volume impact
    
    
    10.5Total increase
    
    $
    10.8
  -50-




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##### Table of Contents



®
 Layers
 For the Years Ended December 31,Restated2007
    
    2006
    
    % Change($ in millions)Net sales
    
    $
    514.0
    
    
    $
    398.4
    
    
    
    29.0
    %Gross profit
    
    
    77.2
    
    
    
    19.2
    
    
    
    302.1
    %Gross profit as a % of sales
    
    
    15.0
    %
    
    
    4.8
    %
 IncreaseNet Sales Variance
    
    (decrease)($ in millions)Pricing / product mix impact
    
    $
    158.9Volume impact
    
    
    11.3Acquisitions and divestitures
    
    
    (54.6
    )Total increase
    
    $
    115.6
  IncreaseGross Profit Variance
    
    (decrease)($ in millions)Margin / product mix impact
    
    $
    61.9Volume impact
    
    
    0.5Unrealized hedging gains and losses
    
    
    0.3Acquisitions and divestitures
    
    
    (4.7
    )Total increase
    
    $
    58.0
  Agronomy
  Net Sales
  -51-




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##### Table of Contents



Gross Profit
  Liquidity and Capital Resources
 Overview
       2008
    
    
    2007($ in millions)Cash and cash equivalents
    
    $
    30.8
    
    
    $
    116.8Availability on revolving credit facility
    
    
    188.6
    
    
    
    196.0Availability on receivable securitization program
    
    
    120.0
    
    
    
    230.0Availability on the Agriliance credit facility
    
    
    
    
    
    
    20.0Availability on MoArk revolving credit facility
    
    
    40.0
    
    
    
    40.0Total liquidity
    
    $
    379.4
    
    
    $
    602.8
  -52-




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##### Table of Contents



Cash Flows
  Operating Activities
 Restated2008
    
    
    2007
    
    
    2006($ in millions)Net earnings
    
    $
    159.6
    
    
    $
    160.9
    
    
    $
    69.4Adjustments to reconcile net earnings to net cash provided by operating
activities
    
    
    121.2
    
    
    
    13.3
    
    
    
    139.2Changes in current assets and liabilities, net of acquisitions and divestitures
    
    
    (275.9
    )
    
    
    156.8
    
    
    
    (8.7
    )Net cash provided by operating activities
    
    $
    4.9
    
    
    $
    331.0
    
    
    $
    199.9
 Operating Activities
 Investing Activities
 2008
    
    
    2007
    
    
    2006($ in millions)Additions to property, plant and equipment
    
    $
    (171.3
    )
    
    $
    (91.1
    )
    
    $
    (83.8
    )Acquisitions, net of cash acquired
    
    
    (9.0
    )
    
    
    (2.9
    )
    
    
    (88.1
    )Investments in affiliates
    
    
    (51.1
    )
    
    
    (331.7
    )
    
    
    (4.9
    )Distributions from investments in affiliates
    
    
    1.7
    
    
    
    25.0
    
    
    
    Net settlement on repositioning investment in joint venture
    
    
    
    
    
    
    (87.9
    )
    
    
    Net proceeds from divestiture of businesses
    
    
    
    
    
    
    212.1
    
    
    
    42.5Proceeds from sale of investments
    
    
    21.2
    
    
    
    0.6
    
    
    
    9.3Proceeds from foreign currency exchange contracts on sale of investment
    
    
    3.8
    
    
    
    
    
    
    
    Proceeds from sale of property, plant and equipment
    
    
    6.2
    
    
    
    10.5
    
    
    
    1.7Insurance proceeds for replacement assets
    
    
    4.9
    
    
    
    8.6
    
    
    
    Change in notes receivable
    
    
    (11.6
    )
    
    
    (18.4
    )
    
    
    15.8Other
    
    
    3.0
    
    
    
    (0.1
    )
    
    
    7.2Net cash used by investing activities
    
    $
    (202.2
    )
    
    $
    (275.3
    )
    
    $
    (100.3
    )
 Investing Activities
 Financing Activities
 2008
    
    
    2007
    
    
    2006($ in millions)Increase (decrease) in short-term debt
    
    $
    266.8
    
    
    $
    75.4
    
    
    $
    (99.5
    )Proceeds from issuance of long-term debt
    
    
    0.5
    
    
    
    5.8
    
    
    
    13.7Principal payments on long-term debt and capital lease obligations
    
    
    (58.3
    )
    
    
    (41.4
    )
    
    
    (36.2
    )Payments for redemption of member equities
    
    
    (97.6
    )
    
    
    (58.0
    )
    
    
    (80.6
    )Payments for debt issuance costs
    
    
    
    
    
    
    
    
    
    
    (1.5
    )Other
    
    
    (0.2
    )
    
    
    (0.3
    )
    
    
    4.9Net cash provided (used) by financing activities
    
    $
    111.2
    
    
    $
    (18.5
    )
    
    $
    (199.2
    )
 -53-




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##### Table of Contents



Financing Activities.
 Cash Requirements
  Payments Due by Year (as of December 31, 2008)Less Than
    
    
    
    
    
    
    
    
    
    
    More ThanContractual Commitments
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years($ in thousands)Debt and leases:Revolving credit facility (1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Receivables securitization facility (2)
    
    
    280,000
    
    
    
    280,000
    
    
    
    
    
    
    
    
    
    
    
    Other short-term borrowings (3)
    
    
    129,370
    
    
    
    129,370
    
    
    
    
    
    
    
    
    
    
    
    Long-term debt
    
    
    534,819
    
    
    
    2,864
    
    
    
    328,411
    
    
    
    2,631
    
    
    
    200,913Operating leases
    
    
    112,572
    
    
    
    41,273
    
    
    
    51,608
    
    
    
    17,064
    
    
    
    2,627Other:Swine contract payments (4)
    
    
    55,991
    
    
    
    24,622
    
    
    
    25,302
    
    
    
    6,067
    
    
    
    Non-cancelable purchase commitments (5)
    
    
    2,738,356
    
    
    
    2,627,717
    
    
    
    107,908
    
    
    
    2,731
    
    
    
    Other obligations (6)
    
    
    31,401
    
    
    
    26,726
    
    
    
    3,318
    
    
    
    656
    
    
    
    701Total contractual obligations(7)
    
    $
    3,882,509
    
    
    $
    3,132,572
    
    
    $
    516,547
    
    
    $
    29,149
    
    
    $
    204,241
 
 (1)
    
    A $225 million facility, of which $188.6 million was available as of December 31, 2008. A total
of $36.4 million of the $225 million commitment was unavailable due to outstanding letters of
credit. This facility was undrawn as of December 31, 2008. For more information regarding the
credit facility, please see the caption below entitled Principal Debt Facilities.(2)
    
    A $400 million receivables securitization facility, of which $120 million was available as of
December 31, 2008. For more information regarding this facility, please see the caption below
entitled Principal Debt Facilities.(3)
    
    The Company had $74.5 million as of December 31, 2008 of notes and short-term obligations
outstanding under a revolving line of credit and other borrowing arrangements for a wholly owned
subsidiary that provides operating loans and facility financing to farmers and livestock producers,
$34.9 million of other short-term borrowings related to a consolidated joint venture within
Agronomy, and $20.0 million of short-term borrowings from our 50% owned joint venture Agriliance,
LLC.(4)
    
    Includes contractual commitments to purchase weaner pigs, feeder pigs and producer services,
accounted for in our Feed and Other segments. In Feed, we enter into commitments to purchase
weaner and feeder pigs from producers and generally have commitments to immediately resell the
animals to swine producers. Market exposure is managed by procuring contracts to resell the pigs
at terms that capture the pig cost and associated margin. In our Other segment, we account for
purchase commitments used to source feeder pigs for our Aligned System program. We sold our sow
herd and feeder pig inventory and the production facilities for our Aligned System program as part
of the sale of swine production assets to Maschhoff West LLC in February 2005, but retained
long-term agreements to supply feeder pigs to our local cooperative members. For the Aligned
System program, pigs are purchased from Maschhoff West LLC utilizing fixed or variable pricing and
immediately resold utilizing similar pricing under sales contracts with local cooperatives. Our
profit or loss from these programs is minimal.(5)
    
    Relates to raw materials in Dairy Foods, Feed, Seed, Agronomy and Layers. These purchase
commitments, estimated for this table, are contracted on a short-term basis, typically for one year
or less.(6)
    
    Primarily represent contractual commitments to purchase marketing and consulting services and
capital equipment.(7)
    
    Excludes contingent obligations under our pension and postretirement plans. For accounting
disclosures of our pension and postretirement obligations, see Note 15 in Item 8. Financial
Statements and Supplementary Data. -54-




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##### Table of Contents



Guarantees and Indemnification Obligations
   Principal Debt Facilities
     -55-




---



##### Table of Contents



-56-




---



##### Table of Contents



Capital Leases
  Off-Balance Sheet Arrangements
  Critical Accounting Estimates
  Inventory Valuation.
 Rebates Receivable. Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor
 -57-




---



##### Table of Contents



Allowance for Doubtful Accounts.
 Recoverability of Long-Lived Assets.
 Income Taxes, Tax Valuation, and Uncertain Tax Positions. Accounting for Uncertainties in Income Taxes.
  Trade Promotion and Consumer Incentive Activities.
 -58-




---



##### Table of Contents



Pension and Other Post-Retirement Plans.
  Recent Accounting Pronouncements
      -59-




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 Commodity Risk
  -60-




---



##### Table of Contents



At December 31,2008
    
    2007Notional
    
    Fair
    
    Notional
    
    FairAmount
    
    Value
    
    Amount
    
    Value($ in thousands)Commodity futures and options contractsCommitments to purchase
    
    $
    281,634
    
    
    $
    (75,045
    )
    
    $
    213,544
    
    
    $
    28,856Commitments to sell
    
    
    (221,926
    )
    
    
    39,223
    
    
    
    (80,577
    )
    
    
    (11,501
    )
 Year Ended December 31,2008
    
    2007Realized
    
    
    
    
    
    RealizedNotional
    
    Gains
    
    Notional
    
    GainsAmount
    
    (Losses)
    
    Amount
    
    (Losses)($ in thousands)Commodity futures and options contractsTotal volume of exchange traded contracts:Commitments to purchase
    
    $
    3,180,652
    
    
    $
    9,609
    
    
    $
    1,791,876
    
    
    $
    29,395Commitments to sell
    
    
    (3,221,418
    )
    
    
    9,598
    
    
    
    (1,887,775
    )
    
    
    8,285
 Interest Rate Risk
   Inflation Risk
  
 Item 8. Financial Statements and Supplementary Data.
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  -61-




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##### Table of Contents



Item 9A. Controls and Procedures.
 Evaluation of disclosure controls and procedures
   Managements report on internal control over financial reporting
  Material Weakness Identified as of April 15, 2008:
  
    
    Obtain evidence to support the existence of binding arrangements with vendors, and
    
    Accounting personnel review procedures over the existence of such evidence of
binding arrangements to support vendor rebates recognized in the consolidated
financial statements.
  Material Weaknesses Identified as of September 30, 2008:
 Inadequate books and records
  
    
    Prepared fair value estimates and, among other things, consulted an
independent advisor relating to the valuation of certain assets.
 -62-




---



##### Table of Contents




    
    Restated certain periods of the Companys historical consolidated
financial statements based on fair value corrections and other errors.
    
    Beginning in 2007, MoArk consolidated and centralized its finance
organization and currently has appropriate controls in place to ensure
the existence and proper maintenance of its books and records.
  Material Weaknesses Identified as of September 30, 2008 and December 31, 2008:
 Inadequate interim periodic close process
  Personnel lacked adequate accounting expertise and business knowledge
   Remediation and Changes in Internal Control over Financial Reporting:
  Change in internal controls
  By
    /s/ Chris PolicinskiChristopher J. PolicinskiPresident and Chief Executive OfficerBy
    /s/ DANIEL KNUTSONDaniel E. KnutsonChief Financial Officer No Requirement for Independent Auditor Attestation
  
 Item 9B. Other Information.
  -63-




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  Name
    
    Age
    
    TitleChris Policinski
    
    
    50
    
    
    President and Chief Executive OfficerDaniel Knutson
    
    
    52
    
    
    Senior Vice President and Chief Financial OfficerSteve Dunphy
    
    
    51
    
    
    Executive Vice President and Chief Operating
Officer, Dairy Foods Value AddedAlan Pierson
    
    
    58
    
    
    Executive Vice President and Chief Operating
Officer, Dairy Foods IndustrialFernando Palacios
    
    
    49
    
    
    Executive Vice President and Chief Operating
Officer, FeedMike Vandelogt
    
    
    54
    
    
    Executive Vice President and Chief Operating
Officer  SeedRodney Schroeder
    
    
    53
    
    
    Executive Vice President and Chief Operating
Officer  Crop Protection ProductsDavid Seehusen
    
    
    62
    
    
    Executive Vice President, Ag Business Development
and Member ServicesJean-Paul Ruiz-Funes
    
    
    51
    
    
    Senior Vice President, Corporate Strategy and
Business DevelopmentBarry Wolfish
    
    
    52
    
    
    Senior Vice President, Corporate Marketing StrategyJim Fife
    
    
    59
    
    
    Senior Vice President, Public AffairsPeter Janzen
    
    
    49
    
    
    Senior Vice President, General CounselKaren Grabow
    
    
    59
    
    
    Senior Vice President, Human ResourcesDave Andresen
    
    
    55
    
    
    DirectorRobert Bignami
    
    
    66
    
    
    DirectorHarley Buys
    
    
    56
    
    
    DirectorMark Christenson
    
    
    57
    
    
    DirectorMark Clark
    
    
    46
    
    
    DirectorBen Curti
    
    
    58
    
    
    DirectorJames Deatherage
    
    
    51
    
    
    DirectorJim Hager
    
    
    57
    
    
    DirectorPete Kappelman
    
    
    46
    
    
    Director, Chairman of the BoardCornell Kasbergen
    
    
    51
    
    
    DirectorPaul Kent, Jr.
    
    
    58
    
    
    DirectorLarry Kulp
    
    
    66
    
    
    DirectorRobert Marley
    
    
    57
    
    
    DirectorJim Miller
    
    
    67
    
    
    DirectorRonnie Mohr
    
    
    60
    
    
    Director, First Vice Chairman of the BoardRon Muzzall
    
    
    46
    
    
    DirectorJames Netto
    
    
    49
    
    
    DirectorDouglas Reimer
    
    
    58
    
    
    Director, SecretaryRichard Richey
    
    
    60
    
    
    DirectorMyron Voth
    
    
    55
    
    
    DirectorThomas Wakefield
    
    
    59
    
    
    DirectorAl Wanner
    
    
    61
    
    
    DirectorWayne Wedepohl
    
    
    60
    
    
    DirectorJohn Zonneveld, Jr.
    
    
    55
    
    
    DirectorHoward Liszt
    
    
    62
    
    
    Nonvoting Advisory MemberRobert Thompson
    
    
    63
    
    
    Nonvoting Advisory MemberGalen Vetter
    
    
    57
    
    
    Nonvoting Advisory Member
  Chris Policinski,
 -64-




---



##### Table of Contents



Daniel Knutson,
 Fernando Palacios,
 Alan Pierson
 Steve Dunphy
 Mike Vandelogt,
 Rod Schroeder,
 Dave Seehusen
 Jean-Paul Ruiz-Funes
 Barry Wolfish
 Jim Fife,
 Peter Janzen,
 Karen Grabow,
 Dave Andresen
 Robert Bignami
 Harley Buys
 -65-




---



##### Table of Contents



Mark Christenson
 Mark Clark
 Ben Curti
 James Deatherage
 Jim Hager
 Pete Kappelman
 Cornell Kasbergen
 Paul Kent, Jr.
 Larry Kulp
 Robert Marley
 Jim Miller
 Ronnie Mohr
 Ron Muzzall
 James Netto
 Douglas Reimer
 Richard Richey
 -66-




---



##### Table of Contents



Myron Voth
 Thomas Wakefield
 Al Wanner
 Wayne Wedepohl
 John Zonneveld, Jr.
 Howard Liszt
 Professor Robert Thompson
 Galen Vetter
    -67-




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##### Table of Contents



Item 11. Executive Compensation.
 Overview
    Executive Compensation Philosophy
  
    
    Deliver market-competitive compensation
    
    Reflect an acceptable degree of internal equity among executive officers; that is,
comparable compensation opportunities for positions of comparable content and ability to
impact company performance
    
    Provide a sharpened focus on key financial measures, reward executives for success in
meeting and exceeding financial goals, and motivate executives to exceed financial goals
    
    Reinforce a culture of performance
    
    Be affordable in the context of Board-approved short and long-term financial goals
 Process
   -68-




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##### Table of Contents



Andersons, Inc
    
    Archer-Daniels-Midland Co.
    
    Campbell Soup Co.
    
    Chemtura Corp.Chiquita Brands Intl. Inc.
    
    CHS Inc.
    
    Coca-Cola Co.
    
    ConAgra Foods Inc.Dean Foods Co.
    
    Del Monte Foods Co.
    
    Dow Chemical Co.
    
    Du PontEastman Chemical Co.
    
    General Mills Inc.
    
    Heinz Co.
    
    Hershey Co.Hormel Foods Corp.
    
    Kellogg Co.
    
    Kraft Foods Inc.
    
    McCormick & Company Inc.Monsanto Co.
    
    PepsiCo Inc.
    
    Pilgrims Pride Corp.
    
    Ralcorp Holdings IncSara Lee Corp.
    
    Scotts Miracle-Gro
    
    Seaboard Corp.
    
    Smithfield Foods Inc.J.M. Smucker Co.
    
    Sysco Corp.
    
    Tyson Foods Inc.
  Compensation Structure
  
    
    Annual base salary
    
    Annual and long-term variable compensation
    
    Long-term equity value incentive compensation
    
    Retirement benefits
    
    Perquisites and other personal benefits
   Annual Base Salary.
 -69-




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##### Table of Contents



Annual and Long-Term Variable Compensation.
  
    
    The Executive Committee is responsible for reviewing and approving the plan design while
management is responsible for recommending the plan design.
    
    All executive officers are eligible to participate in the variable compensation plans.
The President can, in the Presidents sole discretion, exclude an executive officer from
either or both plans for business reasons. No exclusions were made, with respect to named
executive officers, under either plan for payments earned in 2008.
    
    The President reserves the right to, in the Presidents sole discretion, increase,
reduce, or withhold awards under the plans to executive officers where unusual
circumstances warrant. This discretion was not exercised in 2008 to any named executive
officer. There is no provision in either plan to recoup payment from an executive officer
once payment has been made.
    
    Unique nonrecurring business events that have a substantial impact on the Companys
financial results in a given year may be excluded from the calculations for determining
awards from the plans. An example would be a major gain or loss from an acquisition or
divestiture. Amounts to be excluded are determined by the President and reported to the
Executive Committee. The Executive Committee must approve any amounts to be excluded for
purposes of determining the Presidents award.
    
    The Board of Directors annually approves the financial targets for each plan. In
addition, the actual results for the measures in each plan are reviewed and approved by the
Executive Committee after the performance period closes. Along with this, the total of the
calculated award amounts for all executive officers is reviewed by the Executive Committee
annually.
    
    The Executive Committee approves the calculated awards for the President and has the
sole discretion to increase, reduce, or withhold calculated awards for the President under
the plans where unusual circumstances warrant.
    
    Amounts earned under the variable compensation plans by named executive officers in 2008
are shown in the Non-equity Incentive Plan column of the Summary Compensation Table.
    
    Executive officers can elect in advance to defer all or a portion of their earned
awards. Earnings under both plans are included as eligible earnings for purposes of our
qualified and non-qualified retirement programs.
  Annual Variable Compensation .
 
    
    Recognize and reward achievement of both overall Company results and business unit results.
    
    Integrate business strategies with the compensation structure and align individual efforts
in achieving Company and business unit results.
    
    Provide a market-competitive variable compensation element.
 -70-




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##### Table of Contents



Measure as % of Total TargetAward OpportunityBusiness UnitCorporate Officer
    
    OfficerTotal Company ROE
    
    
    20
    %
    
    
    20
    %Total Company Pre-tax Earnings
    
    
    65
    %
    
    
    30
    %Business Unit Pre-tax Earnings
    
    
    0
    %
    
    
    35
    %Individual Objectives
    
    
    15
    %
    
    
    15
    %Total
    
    
    100
    %
    
    
    100
    %
  
    
    Actual performance must reach 85% of the Board-approved plan (the Plan) in order for an
award for that measure to be earned. At 85% performance on all measures, an award of 45.8% of
target is earned.
    
    Actual performance must reach 100% of Plan in order for a target award for that measure to
be earned.
    
    For the ROE measure, performance must reach 200% of Plan for the maximum award for the
measure to be earned. For the Pre-tax Earnings measure, performance must reach 175% of Plan
in order for the maximum award for the measure to be earned.
     Executive Long-Term Variable Compensation Plan (LTIP).
 
    
    Link executive pay with long-term business performance.
    
    Align management and member interests.
    
    Provide for a competitive pay element and encourage retention of key executives.
    
    Drive performance of individual business units.
 -71-




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##### Table of Contents




    
    Actual performance on both measures must reach 85% of Plan in order for payments to be
earned. At 85% performance on both measures, an award of 40% of target is earned.
    
    Actual performance on both measures must reach Plan, or actual performance on at least one
measure must exceed Plan in order for a target award to be earned.
    
    Actual performance on both measures must reach 110% of Plan in order for the maximum award
of 125% of target to be earned.
    
    The financial goals for corporate executive officers are tied 100% to Company results. For
the performance period of 2006-08 the financial goals for executive officers assigned to a
business unit are tied 100% to business unit results. For the performance periods of 2007-09
and 2008-10 the financial goals for executive officers assigned to a business unit are tied
50% to Company results and 50% to business unit results. This change was made to increase
officer focus on total company performance. In December 2008 the Executive Committee of the
Board approved a request by the President to change the Company / business unit weighting for
executive officers assigned to a business unit. For the performance period of 2009-11 the
financial goals for executive officers assigned to a business unit will be tied 25% to Company
results and 75% to business unit results. This change is being made to increase focus at the
business unit level on growing the business and to better reward executive officers for
generating growth.
   Long-Term Equity Value Incentive Compensation.
  -72-




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##### Table of Contents



Retirement Benefits.
 1.
    
    Land OLakes Employee Retirement Plan2.
    
    Non-Qualified Excess Benefit Plan (IRS Limits)3.
    
    Land OLakes Employee Savings and Supplemental Retirement Plan4.
    
    Non-Qualified Excess Benefit Savings Plan5.
    
    Land OLakes Non-Qualified Deferred Compensation Plan
 -73-




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##### Table of Contents



Land OLakes Employee Retirement Plan (Pension Plan) and Land OLakes Non-Qualified Excess Benefit
Plan (IRS Limits).
      Land OLakes Employee Savings and Supplemental Retirement Plan (401(k) Plan).
    -74-




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##### Table of Contents



Non-Qualified Executive Excess Benefit Savings Plan.
   Land OLakes Non-Qualified Deferred Compensation Plan.
     1.
    
    The approval by the members of our Company of a reorganization, merger, share exchange or
consolidation in each case, where parties who were members of the Company immediately prior to
such reorganization, merger, share exchange or consolidation do not, immediately thereafter,
hold more than fifty percent (50%) of the combined voting power entitled to vote generally in
the election of directors of the reorganized, merged, surviving or consolidated company; or a
liquidation or dissolution of the Company or of the sale of all or substantially all of the
Companys assets;2.
    
    Consummation of a business combination between the Company and an entity which has either
assets or sales equal to or greater than eighty percent (80%) of the assets or sales,
respectively, of the Company as determined with reference to the companys most recent annual
report; or3.
    
    A change of fifty percent (50%) in the Executive Officers of the Company at the level of Vice
President and above within a consecutive twelve (12) month period.
 -75-




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##### Table of Contents



Other Personal Benefits and Perquisites.
 Severance Agreement.
  1.
    
    Involuntary Termination; defined as the Presidents termination of employment by the Company
which is not effected for Cause.2.
    
    Voluntary Termination for Good Reason following a Change of Control or Other Substantial
Change of Circumstances.
      -76-




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##### Table of Contents



EXECUTIVE COMMITTEE REPORT
   /s/ Pete Kappelman
    
    /s/ Ronnie MohrPete Kappelman
    
    Ronnie Mohr/s/ John Zonneveld
    
    /s/ Doug ReimerJohn Zonneveld
    
    Doug Reimer/s/ Cornell Kasbergen
    
    /s/ Paul KentCornell Kasbergen
    
    Paul Kent/s/ Robert Marley
    
    /s/ Jim MillerRobert Marley
    
    Jim Miller
 -77-




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##### Table of Contents



SUMMARY COMPENSATION TABLE
  (h)Change inPension Value(f)
    
    (g)
    
    andValue
    
    Non-
    
    Nonqualified
    
    (i)Appreciation
    
    Equity
    
    Deferred
    
    All Other(c)
    
    (d)
    
    Right Unit
    
    Incentive
    
    Compensation
    
    Compensation
    
    (j)(a)
    
    (b)
    
    Salary
    
    Bonus
    
    Awards1
    
    Plan2
    
    Earnings3
    
    4, 5, 6
    
    TotalName & Principal Position
    
    Year
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)Christopher J. Policinski
    
    
    2008
    
    
    $
    900,000
    
    
    $
    
    
    
    $
    2,639,552
    
    
    $
    2,668,500
    
    
    $
    438,475
    
    
    $
    90,673
    
    
    $
    6,737,200President &
    
    
    2007
    
    
    
    823,558
    
    
    
    
    
    
    
    1,013,521
    
    
    
    2,055,998
    
    
    
    127,959
    
    
    
    70,314
    
    
    
    4,091,350Chief Executive Officer
    
    
    2006
    
    
    
    750,000
    
    
    
    
    
    
    
    311,774
    
    
    
    682,800
    
    
    
    121,671
    
    
    
    131,283
    
    
    
    1,997,528Daniel E. Knutson
    
    
    2008
    
    
    $
    509,646
    
    
    $
    
    
    
    $
    1,495,239
    
    
    $
    1,045,157
    
    
    $
    478,128
    
    
    $
    48,075
    
    
    $
    3,576,245Senior Vice President &
    
    
    2007
    
    
    
    481,875
    
    
    
    
    
    
    
    819,653
    
    
    
    956,331
    
    
    
    80,864
    
    
    
    60,371
    
    
    
    2,399,094Chief Financial Officer
    
    
    2006
    
    
    
    451,690
    
    
    
    
    
    
    
    280,067
    
    
    
    308,414
    
    
    
    279,162
    
    
    
    42,876
    
    
    
    1,362,209Fernando J. Palacios
    
    
    2008
    
    
    $
    527,995
    
    
    $
    
    
    
    $
    986,528
    
    
    $
    510,360
    
    
    $
    125,431
    
    
    $
    75,859
    
    
    $
    2,226,173Executive Vice President
    
    
    2007
    
    
    
    511,766
    
    
    
    
    
    
    
    500,489
    
    
    
    756,996
    
    
    
    47,201
    
    
    
    84,397
    
    
    
    1,900,849& Chief Operating Officer
 Feed
    
    
    2006
    
    
    
    445,303
    
    
    
    
    
    
    
    161,188
    
    
    
    300,045
    
    
    
    78,761
    
    
    
    52,084
    
    
    
    1,037,381Barry C. Wolfish
    
    
    2008
    
    
    $
    378,653
    
    
    $
    
    
    
    $
    640,817
    
    
    $
    630,457
    
    
    $
    122,528
    
    
    $
    37,426
    
    
    $
    1,809,881Senior Vice President,
    
    
    2007
    
    
    
    336,119
    
    
    
    
    
    
    
    351,279
    
    
    
    498,728
    
    
    
    36,640
    
    
    
    39,727
    
    
    
    1,262,493Corporate Marketing Strategy
    
    
    2006
    
    
    
    285,185
    
    
    
    
    
    
    
    120,029
    
    
    
    163,977
    
    
    
    42,192
    
    
    
    26,076
    
    
    
    637,459Peter S. Janzen
    
    
    2008
    
    
    $
    420,989
    
    
    $
    
    
    
    $
    386,461
    
    
    $
    690,926
    
    
    $
    298,764
    
    
    $
    40,093
    
    
    $
    1,837,233Senior Vice President,
    
    
    2007
    
    
    
    395,508
    
    
    
    
    
    
    
    196,122
    
    
    
    616,608
    
    
    
    94,739
    
    
    
    45,556
    
    
    
    1,348,533General Counsel
    
    
    2006
    
    
    
    352,008
    
    
    
    
    
    
    
    72,267
    
    
    
    198,532
    
    
    
    153,199
    
    
    
    29,624
    
    
    
    805,630
 
 1)
    
    The amounts in column (f) reflect the fiscal year 2006 through 2008 expense recognized for
financial reporting purposes, in conformance with FAS 123(R), of grants made under the Land
OLakes Cooperative Incentive Plan (CVIP) and include amounts from grants made in 2008 and
prior years.2)
    
    The amounts in column (g) reflect earnings under the Land OLakes Annual Variable
Compensation and Long-Term Variable Compensation Plans, the details of which are outlined in
the accompanying Compensation Discussion and Analysis report.3)
    
    The amounts in column (h) reflect the actuarial increase in the present value of benefits
under the Land OLakes qualified and non-qualified pension plans. The amounts are based on
assumptions and measurement dates that are the same as those used for the valuation of pension
liabilities in the Fiscal 2008 annual report.4)
    
    The amounts in column (i) reflect the sum total of the value of the following elements
provided to all named executive officers: 
    
    Imputed income and associated tax gross-up for the value of company-provided executive life and disability insurance
    
    Matching contributions made by Land OLakes under the Land OLakes Savings and Supplemental Retirement Plan (401(k))
    
    Matching contributions made by Land OLakes under the Land OLakes non-qualified
deferred compensation and excess benefit savings plans
    
    Car allowance
 5)
    
    The amount in column (i) for Mr. Policinski also includes monthly dues for membership in a
country club.6)
    
    The amount in column (i) for Mr. Palacios also includes company-paid expenses for travel from
his Florida home to Land OLakes headquarters in Minnesota.7)
    
    Prior to 2008, Mr. Wolfish served as Vice President of Strategy and Business Development. -78-




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##### Table of Contents



GRANTS OF PLAN-BASED AWARDS IN 2008
 (j)All Other ValueAppreciationRights (VAR)Unit Awards:
    
    
    
    
    
    (l)Estimated Future Payouts Under Non-Equity
    
    Number of
    
    
    
    
    
    Grant DateIncentive Plan Awards1
    
    Securities
    
    (k)
    
    Fair Value of(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    Underlying
    
    VAR Unit
    
    VAR unitName
    
    Grant Date2
    
    Threshold ($)3
    
    Target ($)
    
    Maximum ($)
    
    VAR Units
    
    Exercise Price
    
    Awards4Christopher J.
Policinski
    
    
    1/1/2008
    
    
    $
    360,000
    
    
    $
    900,000
    
    
    $
    1,125,000
    
    
    
    12,000
    
    
    $
    69.77
    
    
    
    (CEO)
    
    
    7/1/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,000
    
    
    $
    69.77Daniel E.
Knutson
    
    
    1/1/2008
    
    
    $
    157,338
    
    
    $
    393,345
    
    
    $
    491,681
    
    
    
    5,250
    
    
    $
    69.77
    
    
    
    (CFO)Fernando J.
Palacios
    
    
    1/1/2008
    
    
    $
    164,160
    
    
    $
    410,400
    
    
    $
    513,000
    
    
    
    5,250
    
    
    $
    69.77
    
    
    
    Barry C.
Wolfish
    
    
    1/1/2008
    
    
    $
    90,877
    
    
    $
    227,192
    
    
    $
    283,990
    
    
    
    2,250
    
    
    $
    69.77
    
    
    
    Peter S. Janzen
    
    
    1/1/2008
    
    
    $
    98,168
    
    
    $
    245,419
    
    
    $
    306,774
    
    
    
    2,250
    
    
    $
    69.77
    
    
    
    
 
 1)
    
    Information displayed reflects participation in the 2008-10 performance period of the Land
OLakes Executive Long-term Variable Compensation Plan (LTIP). The target awards are
calculated using January 1, 2008 base salaries. Actual awards earned (if any) will be based
on January 1, 2010 base salaries which cannot at this time be predicted.2)
    
    All grants made during a fiscal year under the Land OLakes Cooperative Value Incentive Plan
(CVIP) are deemed to have a grant date of January 1 of the year. Each grant has the same
exercise price, as the CVIP valuation is performed once a year based on prior fiscal year
results. The 2008 grants shown for Mr. Policinski were approved by the Executive Committee of
the Board on December 17, 2007 and June 17, 2008 while the 2008 grants for the other named
executive officers were approved by Mr. Policinski on December 4, 2007.3)
    
    Estimated award when threshold performance level of 85% of target Pre-tax and ROIC is
achieved. Under the LTIP terms, for performance below this level, no payment is earned. The
maximum payment is earned when both Pre-tax and ROIC hit 110% of target.4)
    
    Since this a formula plan, management does not use Black-Scholes or any other similar
modeling tool to calculate the grant date fair value of the underlying unit awards, even
though such amounts could be calculated. -79-




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##### Table of Contents



OUTSTANDING EQUITY AWARDS AT 2008 FISCAL YEAR-END
 Value Appreciation Rights (VAR) Unit Awards(e)
Equity Incentive(c)
    
    (d)
    
    Plan Awards:Number of
    
    Number of
    
    Number ofSecurities
    
    Securities
    
    SecuritiesUnderlying
    
    Underlying
    
    UnderlyingUnexercised
    
    Unexercised
    
    Unexercised
    
    (f)
    
    (g)(a)
    
    (b)
    
    VAR Units (#)
    
    VAR Units (#)
    
    Unearned VAR
    
    VAR Units
    
    VAR UnitsName
    
    Date of Grant
    
    Exercisable1
    
    Unexercisable
    
    Units (#)
    
    Exercise Price
    
    Expiration Date2Christopher J.
Policinski (CEO)
    
    
    7/1/2008
    
    
    
    9,000
    
    
    
    27,000
    
    
    
    
    
    
    $
    69.77
    
    
    
    1/1/2008
    
    
    
    3,000
    
    
    
    9,000
    
    
    
    
    
    
    $
    69.77
    
    
    
    1/1/2007
    
    
    
    6,000
    
    
    
    6,000
    
    
    
    
    
    
    $
    49.86
    
    
    
    1/1/2006
    
    
    
    9,000
    
    
    
    3,000
    
    
    
    
    
    
    $
    41.11
    
    
    
    1/1/2005
    
    
    
    5,250
    
    
    
    
    
    
    
    
    
    
    $
    34.47
    
    
    
    1/1/2004
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    $
    27.11
    
    
    
    1/1/2003
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    $
    27.69
    
    
    
    1/1/2002
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    $
    35.69
    
    
    
    1/1/2001
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    $
    51.50
    
    
    
    Daniel E.
Knutson (CFO)
    
    
    1/1/2008
    
    
    
    1,312.5
    
    
    
    3,937.5
    
    
    
    
    
    
    $
    69.77
    
    
    
    1/1/2007
    
    
    
    2,625
    
    
    
    2,625
    
    
    
    
    
    
    $
    49.86
    
    
    
    1/1/2006
    
    
    
    3,937.5
    
    
    
    1,312.5
    
    
    
    
    
    
    $
    41.11
    
    
    
    1/1/2005
    
    
    
    5,250
    
    
    
    
    
    
    
    
    
    
    $
    34.47
    
    
    
    1/1/2004
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    $
    27.11
    
    
    
    1/1/2003
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    $
    27.69
    
    
    
    1/1/2002
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    $
    35.69
    
    
    
    1/1/2001
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    $
    51.50
    
    
    
    Fernando J. Palacios
    
    
    1/1/2008
    
    
    
    1,312.5
    
    
    
    3,937.5
    
    
    
    
    
    
    $
    69.77
    
    
    
    1/1/2007
    
    
    
    2,625
    
    
    
    2,625
    
    
    
    
    
    
    $
    49.86
    
    
    
    1/1/2006
    
    
    
    3,937.5
    
    
    
    1,312.5
    
    
    
    
    
    
    $
    41.11
    
    
    
    1/1/2005
    
    
    
    5,250
    
    
    
    
    
    
    
    
    
    
    $
    34.47
    
    
    
    1/1/2004
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    $
    27.11
    
    
    
    1/1/2003
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    $
    27.69
    
    
    
    1/1/2002
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    $
    35.691/1/2001
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    $
    51.50Barry C. Wolfish
    
    
    1/1/2008
    
    
    
    562.5
    
    
    
    1,687.5
    
    
    
    
    
    
    $
    69.77
    
    
    
    1/1/2007
    
    
    
    1,125
    
    
    
    1,125
    
    
    
    
    
    
    $
    49.86
    
    
    
    1/1/2006
    
    
    
    1,687.5
    
    
    
    562.5
    
    
    
    
    
    
    $
    41.11
    
    
    
    1/1/2005
    
    
    
    2,250
    
    
    
    
    
    
    
    
    
    
    $
    34.47
    
    
    
    1/1/2004
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    $
    27.11
    
    
    
    1/1/2003
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    $
    27.69
    
    
    
    1/1/2002
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    $
    35.69
    
    
    
    1/1/2001
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    $
    51.50
    
    
    
    Peter S. Janzen3
    
    
    1/1/2008
    
    
    
    562.5
    
    
    
    1,687.5
    
    
    
    
    
    
    $
    69.77
    
    
    
    1/1/2007
    
    
    
    843.75
    
    
    
    843.75
    
    
    
    
    
    
    $
    49.86
    
    
    
    1/1/2006
    
    
    
    843.75
    
    
    
    281.25
    
    
    
    
    
    
    $
    41.11
    
    
    
    1/1/2005
    
    
    
    562.5
    
    
    
    
    
    
    
    
    
    
    $
    34.47
    
    
    
    1/1/2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    27.11
    
    
    
    1/1/2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    27.69
    
    
    
    1/1/2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    35.69
    
    
    
    1/1/2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    51.50
    
    
    
    
 
 1)
    
    Value Appreciation Right (VAR) Units and the vesting schedule are described in the Land
OLakes Cooperative Value Incentive Plan (CVIP) section of the accompanying Compensation
Discussion and Analysis report.2)
    
    At the end of a 10-year holding period, on grants made in 2005 and later, undistributed
appreciation is converted to an interest-crediting valuation and the CVIP valuation is no
longer applied. Distribution is made to participants based on a schedule elected by the
participant. VAR Unit value must be distributed to the participant no later than the year
following the year in which the participant reaches Normal Retirement Age as defined in the
Land OLakes Pension Plan. Elected distribution schedules are overridden in the event of the
participants termination of employment or death. In the event of termination of employment,
payment of vested value is made within 90 days and all unvested VAR Units are cancelled. In
the event of death, payment of vested value is made in February of the following year and all
unvested VAR Units are cancelled.3)
    
    During 2008 Peter Janzen received distribution on 7,375 VAR Units for a value of $269,070.
The distribution election was made in 2007 in accordance with IRC 409A. The number of
Unexercised VAR Units (#) Exercisable shown in Column C for Mr. Janzen is net of the
distributed VAR Units. -80-




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NON-QUALIFIED DEFERRED COMPENSATION IN 2008
 (b)
    
    (c)
    
    (d)
    
    
    
    (f)Executive
    
    Registrant
    
    Aggregate
    
    (e)
    
    AggregateContributions in
    
    Contributions in
    
    Earnings in
    
    Aggregate
    
    Balance atLast Fiscal
    
    Last Fiscal
    
    Last Fiscal
    
    Withdrawals/
    
    Last Fiscal(a)
    
    Year1
    
    Year2
    
    Year
    
    Distributions
    
    Year EndName
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)Christopher J.
Policinski (CEO)
    
    $
    
    
    
    $
    39,013
    
    
    $
    21,876
    
    
    $
    
    
    
    $
    327,521Daniel E. Knutson
(CFO)
    
    
    143,000
    
    
    
    16,359
    
    
    
    72,354
    
    
    
    
    
    
    
    1,172,911Fernando J. Palacios
    
    
    227,099
    
    
    
    20,701
    
    
    
    54,365
    
    
    
    
    
    
    
    895,343Barry C. Wolfish
    
    
    25,346
    
    
    
    8,793
    
    
    
    15,348
    
    
    
    
    
    
    
    240,562Peter S. Janzen
    
    
    
    
    
    
    11,071
    
    
    
    2,246
    
    
    
    
    
    
    
    34,095
 
 1)
    
    Contributions made under terms of the Land OLakes Non-Qualified Deferred Compensation Plan,
which is detailed in the accompanying Compensation Discussion and Analysis report.2)
    
    Registrant Contributions provided under terms of the Land OLakes Non-Qualified Deferred
Compensation and Excess Benefit Savings Plan, details of which are outlined in the
accompanying Compensation Discussion and Analysis report. -81-




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##### Table of Contents



PENSION BENEFITS TABLE
 Present Value ofAccumulated
    
    Payments DuringNumber of Years
    
    Benefit2
    
    Last Fiscal YearName
    
    Plan Name1
    
    Credited Service
    
    $
    
    $Christopher J. Policinski (CEO)
    
    Land OLakes, Inc. Employee Retirement Plan
    
    
    11.583
    
    
    $
    319,530
    
    
    $
    Land OLakes, Inc. Supplemental Executive Retirement Plan
    
    
    11.583
    
    
    
    725,005
    
    
    
    Daniel E. Knutson (CFO)
    
    Land OLakes, Inc. Employee Retirement Plan
    
    
    31.000
    
    
    
    796,814
    
    
    
    Land OLakes, Inc. Supplemental Executive Retirement Plan
    
    
    31.000
    
    
    
    1,036,770
    
    
    
    Fernando J. Palacios
    
    Land OLakes, Inc. Employee Retirement Plan
    
    
    8.167
    
    
    
    128,649
    
    
    
    Land OLakes, Inc. Supplemental Executive Retirement Plan
    
    
    8.167
    
    
    
    240,876
    
    
    
    Barry C. Wolfish
    
    Land OLakes, Inc. Employee Retirement Plan
    
    
    9.417
    
    
    
    160,555
    
    
    
    Land OLakes, Inc. Supplemental Executive Retirement Plan
    
    
    9.417
    
    
    
    164,872
    
    
    
    Peter S. Janzen
    
    Land OLakes, Inc. Employee Retirement Plan
    
    
    25.083
    
    
    
    335,067
    
    
    
    Land OLakes, Inc. Supplemental Executive Retirement Plan
    
    
    25.083
    
    
    
    552,794
    
    
    
    
 
 1)
    
    The Land OLakes qualified and non-qualified pension plans are detailed in the accompanying
Compensation Discussion and Analysis report2)
    
    The Present Value of Accumulated Benefit is calculated as of the end of the fiscal year and
based on assumptions and measurement dates that are the same as those used for the valuation
of pension liabilities in the Fiscal 2008 annual report. Post-retirement mortality rates are
based on the RP-2000 Combined Healthy Participant mortality table projected nine years using
scale AA. The rates are gender specific for the Land OLakes, Inc. Employee Retirement Plan.
Male rates are used for the Land OLakes, Inc. Supplemental Executive Retirement Plan. Each
named executive officer is assumed to live to and retire at the earliest retirement age at
which unreduced benefits are available. Details of the qualified pension benefit calculations
are as follows:   -82-




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Potential Payments upon Termination or Change in Control
    -83-




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##### Table of Contents



Value Equivalent ofSalary and
    
    
    
    
    
    AcceleratedIncentive1
    
    Benefits2
    
    Unvested VAR Units
    
    Outplacement
    
    TotalChristopher J. Policinski
(CEO)
    
    $
    5,533,524
    
    
    $
    63,761
    
    
    $
    485,286
    
    
    $
    20,000
    
    
    $
    6,102,571
 
 1.
    
    Amount reflects three times base salary and target annual incentive, plus pro-rated target
LTIP.2.
    
    Includes continuation payment of medical and executive life / LTD benefits.  Salary and
    
    
    
    
    
    Unvested /Incentive1
    
    Benefits2
    
    Forfeited VAR Units
    
    Outplacement
    
    TotalChristopher J. Policinski
(CEO)
    
    $
    1,967,967
    
    
    $
    63,761
    
    
    
    N/A
    
    
    $
    20,000
    
    
    $
    2,051,728
 
 1.
    
    Amount reflects two times base salary.2.
    
    Includes continuation payment of medical and executive life / LTD benefits. -84-




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##### Table of Contents



(b)
    
    (f)(a)
    
    Fees Earned or Paid in Cash1
    
    TotalName
    
    ($)
    
    ($)David Andresen
    
    $
    35,850
    
    
    $
    35,850Robert Bignami
    
    
    37,950
    
    
    
    37,950Lynn Boadwine
    
    
    10,350
    
    
    
    10,350Harley Buys
    
    
    39,450
    
    
    
    39,450Mark Clark
    
    
    40,050
    
    
    
    40,050Dennis Cihlar
    
    
    37,950
    
    
    
    37,950Ben Curti
    
    
    43,950
    
    
    
    43,950Jim Hager
    
    
    40,350
    
    
    
    40,350Pete Kappelman
    
    
    71,150
    
    
    
    71,150Cornell Kasbergen
    
    
    40,200
    
    
    
    40,200Paul Kent, Jr.
    
    
    54,150
    
    
    
    54,150Larry Kulp
    
    
    41,700
    
    
    
    41,700Charles Lindner
    
    
    40,200
    
    
    
    40,200Howard Liszt
    
    
    48,000
    
    
    
    48,000Robert Marley
    
    
    42,000
    
    
    
    42,000Jim Miller
    
    
    35,550
    
    
    
    35,550Ronnie Mohr
    
    
    39,150
    
    
    
    39,150Ron Muzzall
    
    
    42,000
    
    
    
    42,000James Netto
    
    
    41,700
    
    
    
    41,700Art Perdue
    
    
    6,550
    
    
    
    6,550Doug Reimer
    
    
    43,350
    
    
    
    43,350Rich Richey
    
    
    38,100
    
    
    
    38,100Mary Shefland
    
    
    39,400
    
    
    
    39,400Robert Thompson
    
    
    50,500
    
    
    
    50,500Floyd Trammell
    
    
    39,750
    
    
    
    39,750Myron Voth
    
    
    37,350
    
    
    
    37,350Tom Wakefield
    
    
    39,450
    
    
    
    39,450Al Wanner
    
    
    42,150
    
    
    
    42,150John Zonneveld, Jr.
    
    
    45,300
    
    
    
    45,300
 
 1)
    
    Reflects amounts earned in 2008 for retainer, representation/attendance fees (Per Diem), and
Board termination stipend. Directors can defer all or portions of both the retainer and the Per
Diem and the amounts displayed reflect amounts earned prior to any deferrals. Annual retainer for
the Board Chairman is set at $50,000 while the annual retainer for all other Directors is $30,000.
The Per Diem for all Directors is set at $300. -85-




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14. Principal Accountant Fees and Services.
  2008
    
    
    2007($ in thousands)Audit fees(1)
    
    $
    3,461
    
    
    $
    1,242Audit-related fees(2)
    
    
    134
    
    
    
    150Audit and audit-related fees
    
    
    3,595
    
    
    
    1,392Tax fees(3)
    
    
    15
    
    
    
    9Total fees
    
    $
    3,610
    
    
    $
    1,401
 
 (1)
    
    Audit fees consist of the 2008 annual audit of Land OLakes consolidated financial
statements and the re-audit of the 2007, 2006 and prior years MoArk financial statements.(2)
    
    Audit-related fees consist principally of fees for audits of financial statements of
certain employee benefit plans in 2008 and 2007.(3)
    
    Tax fees in 2008 and 2007 consist of benefit plan filings and international services.  -86-




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules.
 (a) Documents filed as part of this Annual Report on Form 10-K :
 
    
    Consolidated Financial Statements:
 Land OLakes, Inc.Financial Statements for the years ended December 31, 2008, 2007 and 2006Report of KPMG LLP, Independent Registered Public Accounting Firm
    
    
    93Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    94Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006
    
    
    95Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006
    
    
    96Consolidated Statements of Equities and Comprehensive Income for the years ended December 31, 2008, 2007 and 2006
    
    
    97Notes to Consolidated Financial Statements
    
    
    98
 Agriliance LLCFinancial Statements (unaudited) for the three months ended November 30, 2008 and the three months
ended November 30, 2007Consolidated Balance Sheets as of November 30, 2008 and August 31, 2008
    
    
    137Consolidated Statements of Operations for the three months ended November 30, 2008 and 2007
    
    
    138Consolidated Statements of Cash Flows for the three months ended November 30, 2008 and 2007
    
    
    139Notes to Consolidated Financial Statements
    
    
    140Financial Statements for the year ended August 31, 2008 (unaudited)Consolidated Balance Sheet as of August 31, 2008
    
    
    141Consolidated Statement of Operations for the year ended August 31, 2008
    
    
    142Consolidated Statement of Cash Flows for the year ended August 31, 2008
    
    
    143Consolidated Statement of Members Equity and Comprehensive Income for the year ended August 31, 2008
    
    
    144Notes to August 31, 2008 Consolidated Financial Statements
    
    
    145Financial Statements for the years ended August 31, 2007 and 2006Report of KPMG LLP, Independent Registered Public Accounting Firm
    
    
    153Consolidated Balance Sheets as of August 31, 2007 and 2006
    
    
    154Consolidated Statements of Operations for the years ended August 31, 2007 and 2006
    
    
    155Consolidated Statements of Cash Flows for the years ended August 31, 2007 and 2006
    
    
    156Consolidated Statements of Members Equity and Comprehensive Income for the years ended August 31, 2007 and 2006
    
    
    157Notes to August 31, 2007 and 2006 Consolidated Financial Statements
    
    
    158
 -87-




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##### Table of Contents



(b)
 Exhibit Index
 Exhibit
    
    Description3.1
    
    Articles of Incorporation and By-Laws, as amended, February 2009. *4.1
    
    Indenture dated as of November 14, 2001, among Land OLakes, Inc. and certain of its subsidiaries, and
U.S. Bank, including Form of 8 3/4% Senior Notes due 2011 and Form of 83/4% Senior Notes due 2011. (1)4.2
    
    Form of New Note under the Indenture dated as of November14, 2001 (included as part of Exhibit 4.5). (1)4.3
    
    Indenture dated as of December 23, 2003, among Land OLakes, Inc., and certain of its subsidiaries, and
U.S. Bank, National Association, including Form of 9% Senior Notes due 2010. (3)4.4
    
    Lien Subordination and Inter creditor Agreement dated as of December 23, 2003, by and among Land OLakes,
Inc., and certain of its subsidiaries, JP Morgan Chase Bank and U.S. Bank, National Association. (3)4.5
    
    Form of New Note under the Indenture dated as of December 23, 2003 (included as part of Exhibit 4.12). (3)4.6
    
    Second Priority Collateral Agreement dated as of December 23, 2003, by and among Land OLakes, Inc. and
certain of its subsidiaries, and U.S. Bank National Association. (3)4.7
    
    Indenture dated as of March 25, 1998 for the 7.45% Capital Securities due March 25, 2028. (3)10.1
    
    Amended and Restated Five-Year Revolving Credit Agreement among Land OLakes, Inc., as Borrower and
JPMorgan Chase Bank, NA, dated as of October11, 2001, amended and restated as of August 29, 2006. (4)10.2
    
    First Amendment to the Amended and Restated Five-Year Revolving Credit Agreement, dated as of February 7,
2007. (6)10.3
    
    Second Amendment to the Amended and Restated Five-Year Revolving Credit Agreement, dated as of September
4, 2007. (7)10.4
    
    Third Amendment to the Amended and Restated Five-Year Revolving Credit Agreement, dated as of March 7,
2008. (9)10.5
    
    Guarantee and Collateral Agreement among Land OLakes, Inc. and certain of its subsidiaries and The Chase
Manhattan Bank, dated as of October 11, 2001. (1)10.6
    
    Third Amended and Restated Receivables Purchase Agreement dated as of September 4, 2007, among Land
OLakes, Inc. LOL SPV, LLC, and CoBank, ACB. (7)10.7
    
    First Amendment, dated as of March 13, 2008, to the Third Amended and Restated Receivables Purchase
Agreement, dated as of September 4, 2007. (9)10.8
    
    Second Amendment and Waiver, dated as of February 18, 2009, of the Third Amended and Restated Receivables
Purchase Agreement, dated as of September 4, 2007. *10.9
    
    Purchase and Sale Agreement, dated as of December 18, 2001, by and among Land OLakes, Inc., Land OLakes
Purina Feed LLC, Purina Mills, LLC, Winfield Solutions, LLC and LOL SPV, LLC. (1)10.10
    
    First Amendment to the Purchase and Sale Agreement, dated as of March 31, 2004. (3)10.11
    
    Second Amendment to the Purchase and Sale Agreement, dated as of October 22, 2004. (3)10.12
    
    Third Amendment to the Purchase and Sale Agreement, dated as of September 7, 2006. (4)10.13
    
    Fourth Amendment to the Purchase and Sale Agreement, dated as of September 4, 2007. (7)10.14
    
    Fifth Amendment to the Purchase and Sale Agreement, dated as of March 13, 2008. (9)10.15
    
    License Agreement among Ralston Purina Company, Purina Mills, Inc. and BP Nutrition Limited dated as of
October 1, 1986. (1)10.16
    
    Ground Lease between Land OLakes, Inc. and Arden Hills Associates dated as of May 31, 1980. (1)10.17
    
    Operating Lease between Arden Hills Associates and Land OLakes, Inc. dated as of May 31, 1980. (1)10.18
    
    Operating Agreement of Agriliance LLC among United Country Brands, LLC, Cenex Harvest States
Cooperatives, Farmland Industries, Inc. and Land OLakes, Inc. dated as of January 4, 2000. (1)10.19
    
    Trademark License Agreement by and between Land OLakes, Inc. and Dean Foods dated as of July 10, 2000. (1)10.20
    
    Agreement Regarding Distribution of Assets by and between United Country Brands, LLC, its parent
organization, CHS Inc. and Winfield Solutions, LLC, and its parent organization, Land OLakes, Inc. (7)10.21
    
    Executive Annual Variable Compensation Plan of Land OLakes. (1)10.22
    
    Land OLakes Long Term Incentive Plan. (1)10.23
    
    Land OLakes Non-Qualified Deferred Compensation Plan. (1)10.24
    
    Land OLakes Non-Qualified Executive Excess Benefit Plan (IRS Limits). (1)10.25
    
    Land OLakes Non-Qualified Executive Excess Benefit Plan (1989 Formula). (1)10.26
    
    Land OLakes Non-Qualified Executive Excess Benefit Savings Plan. (1)10.27
    
    California Cooperative Value Incentive Plan of Land OLakes. (2)10.28
    
    Amended Land OLakes Long Term Incentive Plan. (1)10.29
    
    Amended California Cooperative Value Incentive Plan of Land OLakes. (1)10.30
    
    Land OLakes Cooperative Value Incentive Plan. (5)10.31
    
    Land OLakes Cooperative Value Incentive Plan (2005). (5)
 -88-




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##### Table of Contents



Exhibit
    
    Description10.32
    
    Severance Agreement by and between Christopher Policinski and Land OLakes, Inc., dated as of October 1,
2005. (8)10.33
    
    Amended and Restated Severance Agreement by and between Christopher Policinski and Land OLakes, Inc.,
dated as of January 1, 2009. *12
    
    Statement regarding the computation of ratios of earnings to fixed charges. *18
    
    Preferability Letter from Independent Registered Public Accounting Firm. *21
    
    Subsidiaries of the Registrant. *31.1
    
    Certification Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. *31.2
    
    Certification Pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. *32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. *32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. *
 
 (1)
    
    Incorporated by reference to the identical exhibit to the Registrants Registration Statement
on Form S-4 filed March 18, 2002.(2)
    
    Incorporated by reference to the identical exhibit to the Registrants Registration Statement
on Form S-4 filed May 9, 2002.(3)
    
    Incorporated by reference to the identical exhibit filed with the Companys Form 10-K on
March 30, 2004.(4)
    
    Incorporated by reference to the identical exhibit filed with the Companys Form 10-Q for the
period ending September 30, 2006.(5)
    
    Incorporated by reference to the identical exhibit filed with the Companys Form 10-K for
the year ending December 31, 2005.(6)
    
    Incorporated by reference to the identical exhibit filed with the Companys Form 10-K for
the year ending December 31, 2006.(7)
    
    Incorporated by reference to the identical exhibit filed with the Companys Form 10-Q for
the period ending September 30, 2007.(8)
    
    Incorporated by reference to the identical exhibit filed with the Companys Form 10-K for the
year ended December 31, 2007.(9)
    
    Incorporated by reference to the identical exhibit filed with the Companys Form 10-Q for the
period ending March 31, 2008.#
    
    Management contract, compensatory plan or arrangement required to be filed as an exhibit to this
Form 10-K.*
    
    Filed electronically herewith. -89-




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##### Table of Contents



SIGNATURES
  LAND OLAKES, INC.By
    
    /s/ DANIEL KNUTSONDaniel KnutsonSenior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)  /s/ CHRISTOPHER J. POLICINSKI
    
    President and Chief Executive Officer (Principal Executive Officer)Christopher J. Policinski/s/ DANIEL KNUTSON
    
    Senior Vice President and Chief Financial Officer (Principal Financial and AccountingDaniel Knutson
    
    Officer)/s/ DAVID ANDRESEN
    
    DirectorDavid Andresen/s/ ROBERT BIGNAMI
    
    DirectorRobert Bignami/s/ HARLEY BUYS
    
    DirectorHarley Buys/s/ MARK CHRISTENSON
    
    DirectorMark Christenson/s/ MARK CLARK
    
    DirectorMark Clark/s/ BEN CURTI
    
    DirectorBen Curti/s/ JAMES DEATHERAGE
    
    DirectorJames Deatherage/s/ JIM HAGER
    
    DirectorJim Hager/s/ PETE KAPPELMAN
    
    Director, Chairman of the BoardPete Kappelman/s/ CORNELL KASBERGEN
    
    DirectorCornell Kasbergen/s/ PAUL KENT, JR.
    
    DirectorPaul Kent, Jr./s/ LARRY KULP
    
    DirectorLarry Kulp/s/ ROBERT MARLEY
    
    DirectorRobert Marley
 -90-




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##### Table of Contents



/s/ JIM MILLER
    
    DirectorJim Miller/s/ RONNIE MOHR
    
    DirectorRonnie Mohr/s/ RON MUZZALL
    
    DirectorRon Muzzall/s/ JAMES NETTO
    
    DirectorJames Netto/s/ DOUGLAS REIMER
    
    DirectorDouglas Reimer/s/ RICHARD RICHEY
    
    DirectorRichard Richey/s/ MYRON VOTH
    
    DirectorMyron Voth/s/ THOMAS WAKEFIELD
    
    DirectorThomas Wakefield/s/ AL WANNER
    
    DirectorAl Wanner/s/ WAYNE WEDEPOHL
    
    DirectorWayne Wedepohl/s/ JOHN ZONNEVELD
    
    DirectorJohn Zonneveld
 -91-




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##### Table of Contents



SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15 (d) OF THE ACT
BY REGISTRANT WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Land OLakes, Inc.Financial Statements for the years ended December 31, 2008, 2007 and 2006Report of KPMG LLP, Independent Registered Public Accounting Firm
    
    
    93Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    94Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006
    
    
    95Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006
    
    
    96Consolidated Statements of Equities and Comprehensive Income for the years ended December 31, 2008, 2007 and 2006
    
    
    97Notes to Consolidated Financial Statements
    
    
    98
 Agriliance LLCFinancial Statements (unaudited) for the three months ended November 30, 2008 and the three months ended November 30, 2007Consolidated Balance Sheets as of November 30, 2008 and August 31, 2008
    
    
    137Consolidated Statements of Operations for the three months ended November 30, 2008 and 2007
    
    
    138Consolidated Statements of Cash Flows for the three months ended November 30, 2008 and 2007
    
    
    139Notes to Consolidated Financial Statements
    
    
    140Financial Statements for the year ended August 31, 2008 (unaudited)Consolidated Balance Sheet as of August 31, 2008
    
    
    141Consolidated Statement of Operations for the year ended August 31, 2008
    
    
    142Consolidated Statement of Cash Flows for the year ended August 31, 2008
    
    
    143Consolidated Statement of Members Equity and Comprehensive Income for the year ended August 31, 2008
    
    
    144Notes to August 31, 2008 Consolidated Financial Statements
    
    
    145Financial Statements for the years ended August 31, 2007 and 2006Report of KPMG LLP, Independent Registered Public Accounting Firm
    
    
    153Consolidated Balance Sheets as of August 31, 2007 and 2006
    
    
    154Consolidated Statements of Operations for the years ended August 31, 2007 and 2006
    
    
    155Consolidated Statements of Cash Flows for the years ended August 31, 2007 and 2006
    
    
    156Consolidated Statements of Members Equity and Comprehensive Income for the years ended August 31, 2007 and 2006
    
    
    157Notes to August 31, 2007 and 2006 Consolidated Financial Statements
    
    
    158
 -92-




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
 -93-




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##### Table of Contents



LAND OLAKES, INC.
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    December 31,2008
    
    207($ in thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    30,820
    
    
    $
    116,839Receivables, net
    
    
    1,104,261
    
    
    
    1,006,931Inventories
    
    
    1,083,978
    
    
    
    964,515Prepaid assets
    
    
    1,101,005
    
    
    
    857,257Other current assets
    
    
    123,504
    
    
    
    76,357Total current assets
    
    
    3,443,568
    
    
    
    3,021,899Investments
    
    
    314,487
    
    
    
    304,013Property, plant and equipment, net
    
    
    658,261
    
    
    
    565,293Goodwill, net
    
    
    277,176
    
    
    
    280,942Other intangibles, net
    
    
    120,982
    
    
    
    125,004Other assets
    
    
    166,838
    
    
    
    122,044Total assets
    
    $
    4,981,312
    
    
    $
    4,419,195Liabilities and EquitiesCurrent liabilities:Notes and short-term obligations
    
    $
    409,370
    
    
    $
    132,170Current portion of long-term debt
    
    
    2,864
    
    
    
    3,082Accounts payable
    
    
    1,175,995
    
    
    
    1,150,353Customer advances
    
    
    1,045,705
    
    
    
    926,240Accrued liabilities
    
    
    423,494
    
    
    
    341,421Patronage refunds and other member
equities payable
    
    
    37,751
    
    
    
    28,065Total current liabilities
    
    
    3,095,179
    
    
    
    2,581,331Long-term debt
    
    
    531,955
    
    
    
    586,909Employee benefits and other liabilities
    
    
    358,404
    
    
    
    230,444Minority interests
    
    
    18,922
    
    
    
    6,175Commitments and contingencies (Note 21)Equities:Capital stock
    
    
    1,611
    
    
    
    1,701Member equities
    
    
    947,141
    
    
    
    937,126Accumulated other comprehensive loss
    
    
    (150,277
    )
    
    
    (61,931
    )Retained earnings
    
    
    178,377
    
    
    
    137,440Total equities
    
    
    976,852
    
    
    
    1,014,336Total liabilities and equities
    
    $
    4,981,312
    
    
    $
    4,419,195
  -94-




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##### Table of Contents



LAND OLAKES, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended December 31,(Restated)2008
    
    
    2007
    
    
    2006($ in thousands)Net sales
    
    $
    12,039,259
    
    
    $
    8,924,895
    
    
    $
    7,102,289Cost of sales
    
    
    11,083,910
    
    
    
    8,160,306
    
    
    
    6,443,511Gross profit
    
    
    955,349
    
    
    
    764,589
    
    
    
    658,778Selling, general and administrative
    
    
    756,606
    
    
    
    623,526
    
    
    
    516,504Restructuring and impairment charges
    
    
    2,893
    
    
    
    3,970
    
    
    
    40,513Gain on insurance settlements
    
    
    (10,638
    )
    
    
    (5,941
    )
    
    
    Earnings from operations
    
    
    206,488
    
    
    
    143,034
    
    
    
    101,761Interest expense, net
    
    
    63,232
    
    
    
    49,645
    
    
    
    59,058Other income
    
    
    (12,028
    )
    
    
    (37,157
    )
    
    
    (17,389
    )Equity in earnings of affiliated companies
    
    
    (34,972
    )
    
    
    (68,183
    )
    
    
    (13,674
    )Minority interest in earnings of subsidiaries
    
    
    16,128
    
    
    
    1,469
    
    
    
    1,449Earnings before income taxes
    
    
    174,128
    
    
    
    197,260
    
    
    
    72,317Income tax expense
    
    
    14,508
    
    
    
    36,331
    
    
    
    2,944Net earnings
    
    $
    $159,620
    
    
    $
    $160,929
    
    
    $
    $69,373Applied to:Member equitiesAllocated patronage
    
    $
    114,170
    
    
    $
    97,147
    
    
    $
    72,002Deferred equities
    
    
    2,231
    
    
    
    5,496
    
    
    
    3,015116,401
    
    
    
    102,643
    
    
    
    75,017Retained earnings
    
    
    43,219
    
    
    
    58,286
    
    
    
    (5,644
    )$
    159,620
    
    
    $
    160,929
    
    
    $
    69,373
  -95-




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##### Table of Contents



LAND OLAKES, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,(Restated)2008
    
    
    2007
    
    
    2006($ in thousands)Cash flows from operating activities:Net earnings
    
    $
    159,620
    
    
    $
    160,929
    
    
    $
    69,373Adjustments to reconcile net earnings to net cash provided by operating
activities:Depreciation and amortization
    
    
    91,809
    
    
    
    85,560
    
    
    
    97,078Amortization of deferred financing costs
    
    
    4,443
    
    
    
    2,981
    
    
    
    2,924Gain on extinguishment of debt
    
    
    (379
    )
    
    
    
    
    
    
    Bad debt expense
    
    
    6,850
    
    
    
    22,818
    
    
    
    1,706Proceeds from patronage revolvement received
    
    
    7,490
    
    
    
    6,706
    
    
    
    9,163Non-cash patronage income
    
    
    (5,757
    )
    
    
    (2,543
    )
    
    
    (1,827
    )Insurance recovery  business interruption
    
    
    
    
    
    
    4,551
    
    
    
    Deferred income tax benefit
    
    
    (5,417
    )
    
    
    (31,431
    )
    
    
    8,538(Increase) decrease in other assets
    
    
    (1,121
    )
    
    
    (3,766
    )
    
    
    2,893Increase in other liabilities
    
    
    17,851
    
    
    
    4,156
    
    
    
    5,268Restructuring and impairment charges
    
    
    2,893
    
    
    
    3,970
    
    
    
    40,513Gain from divestiture of businesses
    
    
    
    
    
    
    (28,474
    )
    
    
    (7,585
    )Gain on sale of investments
    
    
    (7,458
    )
    
    
    (8,683
    )
    
    
    (7,980
    )Gain on foreign currency exchange contracts on sale of investment
    
    
    (4,191
    )
    
    
    
    
    
    
    Gain on insurance settlements
    
    
    (10,638
    )
    
    
    (5,941
    )
    
    
    Equity in earnings of affiliated companies
    
    
    (34,972
    )
    
    
    (68,183
    )
    
    
    (13,674
    )Dividends from investments in affiliated companies
    
    
    45,142
    
    
    
    33,699
    
    
    
    4,736Minority interests
    
    
    16,128
    
    
    
    1,469
    
    
    
    1,449Other
    
    
    (1,496
    )
    
    
    (3,638
    )
    
    
    (4,011
    )Changes in current assets and liabilities, net of acquisitions and divestitures:Receivables
    
    
    (88,736
    )
    
    
    (294,013
    )
    
    
    38,829Inventories
    
    
    (97,017
    )
    
    
    (206,950
    )
    
    
    (19,587
    )Prepaid and other current assets
    
    
    (269,075
    )
    
    
    (511,679
    )
    
    
    (60,299
    )Accounts payable
    
    
    19,171
    
    
    
    586,712
    
    
    
    (51,624
    )Customer advances
    
    
    101,292
    
    
    
    506,724
    
    
    
    23,643Accrued liabilities
    
    
    58,515
    
    
    
    75,985
    
    
    
    60,377Net cash provided by operating activities
    
    
    4,947
    
    
    
    330,959
    
    
    
    199,903Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (171,344
    )
    
    
    (91,061
    )
    
    
    (83,763
    )Acquisitions, net of cash acquired
    
    
    (9,040
    )
    
    
    (2,930
    )
    
    
    (88,060
    )Investments in affiliates
    
    
    (51,136
    )
    
    
    (331,674
    )
    
    
    (4,950
    )Distributions from investments in affiliated companies
    
    
    1,678
    
    
    
    25,000
    
    
    
    Net settlement on repositioning investment in joint venture
    
    
    
    
    
    
    (87,875
    )
    
    
    Net proceeds from divestiture of businesses
    
    
    
    
    
    
    212,101
    
    
    
    42,466Proceeds from sale of investments
    
    
    21,213
    
    
    
    626
    
    
    
    9,274Proceeds from foreign currency exchange contracts on sale of investment
    
    
    3,850
    
    
    
    
    
    
    
    Proceeds from sale of property, plant and equipment
    
    
    6,215
    
    
    
    10,502
    
    
    
    1,754Insurance proceeds for replacement assets
    
    
    4,903
    
    
    
    8,635
    
    
    
    Change in notes receivable
    
    
    (11,596
    )
    
    
    (18,406
    )
    
    
    15,781Other
    
    
    3,050
    
    
    
    (202
    )
    
    
    7,183Net cash used by investing activities
    
    
    (202,207
    )
    
    
    (275,284
    )
    
    
    (100,315
    )Cash flows from financing activities:Increase (decrease) in short-term debt
    
    
    266,829
    
    
    
    75,399
    
    
    
    (99,541
    )Proceeds from issuance of long-term debt
    
    
    496
    
    
    
    5,790
    
    
    
    13,710Principal payments on long-term debt and capital lease obligations
    
    
    (58,344
    )
    
    
    (41,432
    )
    
    
    (36,181
    )Payments for debt issuance costs
    
    
    
    
    
    
    
    
    
    
    (1,543
    )Payments for redemption of member equities
    
    
    (97,590
    )
    
    
    (58,049
    )
    
    
    (80,614
    )Other
    
    
    (150
    )
    
    
    (251
    )
    
    
    4,933Net cash provided (used) by financing activities
    
    
    111,241
    
    
    
    (18,543
    )
    
    
    (199,236
    )Net cash used by operating activities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    (349
    )Net (decrease) increase in cash and cash equivalents
    
    
    (86,019
    )
    
    
    37,132
    
    
    
    (99,997
    )Cash and cash equivalents at beginning of year
    
    
    116,839
    
    
    
    79,707
    
    
    
    179,704Cash and cash equivalents at end of year
    
    $
    30,820
    
    
    $
    116,839
    
    
    $
    79,707
  -96-




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##### Table of Contents



LAND OLAKES, INC.
 CONSOLIDATED STATEMENTS OF EQUITIES AND COMPREHENSIVE INCOME
 AccumulatedOtherCapital
    
    
    Member Equities
    
    Comprehensive
    
    
    Retained
    
    
    TotalStock
    
    
    Allocated
    
    
    Deferred
    
    
    Net
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Equities($ in thousands)Balance, December 31, 2005
    
    $
    1,967
    
    
    $
    916,210
    
    
    $
    (22,692
    )
    
    $
    893,518
    
    
    $
    (75,163
    )
    
    $
    71,147
    
    
    $
    891,469Prior period adjustments (see Note 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,608
    
    
    
    4,608Balance, December 31, 2005 As Adjusted
    
    
    1,967
    
    
    
    916,210
    
    
    
    (22,692
    )
    
    
    893,518
    
    
    
    (75,163
    )
    
    
    75,755
    
    
    
    896,077Capital stock issued
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Capital stock redeemed
    
    
    (141
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141
    )Cash patronage and redemption of
member equities
    
    
    
    
    
    
    (80,614
    )
    
    
    
    
    
    
    (80,614
    )
    
    
    
    
    
    
    
    
    
    
    (80,614
    )Redemption included in prior years
liabilities
    
    
    
    
    
    
    29,622
    
    
    
    
    
    
    
    29,622
    
    
    
    
    
    
    
    
    
    
    
    29,622Equities issued for prior merger
    
    
    
    
    
    
    13,896
    
    
    
    
    
    
    
    13,896
    
    
    
    
    
    
    
    
    
    
    
    13,896Other, net
    
    
    
    
    
    
    (8,614
    )
    
    
    (16
    )
    
    
    (8,630
    )
    
    
    
    
    
    
    7,917
    
    
    
    (713
    )Comprehensive income:2006 earnings, as applied
    
    
    
    
    
    
    72,002
    
    
    
    3,015
    
    
    
    75,017
    
    
    
    
    
    
    
    (5,644
    )
    
    
    69,373Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,887
    
    
    
    
    
    
    
    8,887Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78,260Patronage refunds payable
    
    
    
    
    
    
    (18,626
    )
    
    
    
    
    
    
    (18,626
    )
    
    
    
    
    
    
    
    
    
    
    (18,626
    )Balance, December 31, 2006 As Restated
    
    
    1,828
    
    
    
    923,876
    
    
    
    (19,693
    )
    
    
    904,183
    
    
    
    (66,276
    )
    
    
    78,028
    
    
    
    917,763Capital stock issued
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Capital stock redeemed
    
    
    (133
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (133
    )Cash patronage and redemption of
member equities
    
    
    
    
    
    
    (58,049
    )
    
    
    
    
    
    
    (58,049
    )
    
    
    
    
    
    
    
    
    
    
    (58,049
    )Redemption included in prior years
liabilities
    
    
    
    
    
    
    18,626
    
    
    
    
    
    
    
    18,626
    
    
    
    
    
    
    
    
    
    
    
    18,626Other, net
    
    
    
    
    
    
    (2,209
    )
    
    
    (3
    )
    
    
    (2,212
    )
    
    
    
    
    
    
    1,126
    
    
    
    (1,086
    )Comprehensive income:2007 earnings, as applied
    
    
    
    
    
    
    97,147
    
    
    
    5,496
    
    
    
    102,643
    
    
    
    
    
    
    
    58,286
    
    
    
    160,929Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,787
    
    
    
    
    
    
    
    66,787Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227,716Adjustment to initially apply FASB
Statement No. 158, net of income
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62,442
    )
    
    
    
    
    
    
    (62,442
    )Patronage refunds payable
    
    
    
    
    
    
    (28,065
    )
    
    
    
    
    
    
    (28,065
    )
    
    
    
    
    
    
    
    
    
    
    (28,065
    )Balance, December 31, 2007
    
    
    1,701
    
    
    
    951,326
    
    
    
    (14,200
    )
    
    
    937,126
    
    
    
    (61,931
    )
    
    
    137,440
    
    
    
    1,014,336Capital stock issued
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Capital stock redeemed
    
    
    (105
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105
    )Cash patronage and redemption of
member equities
    
    
    
    
    
    
    (97,590
    )
    
    
    
    
    
    
    (97,590
    )
    
    
    
    
    
    
    
    
    
    
    (97,590
    )Redemption included in prior years
liabilities
    
    
    
    
    
    
    28,065
    
    
    
    
    
    
    
    28,065
    
    
    
    
    
    
    
    
    
    
    
    28,065Other, net
    
    
    
    
    
    
    852
    
    
    
    38
    
    
    
    890
    
    
    
    
    
    
    
    (1,212
    )
    
    
    (322
    )Comprehensive income:2008 earnings, as applied
    
    
    
    
    
    
    114,170
    
    
    
    2,231
    
    
    
    116,401
    
    
    
    
    
    
    
    43,219
    
    
    
    159,620Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88,675
    )
    
    
    
    
    
    
    (88,675
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,945Effects of changing the pension plan
measurement date pursuant to FASB
Statement No. 158, net of income
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    329
    
    
    
    (1,070
    )
    
    
    (741
    )Patronage refunds payable
    
    
    
    
    
    
    (37,751
    )
    
    
    
    
    
    
    (37,751
    )
    
    
    
    
    
    
    
    
    
    
    (37,751
    )Balance, December 31, 2008
    
    $
    1,611
    
    
    $
    959,072
    
    
    $
    (11,931
    )
    
    $
    947,141
    
    
    $
    (150,277
    )
    
    $
    178,377
    
    
    $
    976,852
  -97-




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands in tables)
 1. Nature of Operations and Basis of Presentation
 Nature of Operations
  Basis of Presentation
 Basis of Consolidation
  Fiscal Year
  Adjustments and Restatements of Prior Years Consolidated Financial Statements
    -98-




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##### Table of Contents



Previously
    
    
    
    
    
    
    
    
    
    
    PreviouslyReported
    
    
    Effect of
    
    
    As Adjusted
    
    
    Reported
    
    
    Effect of
    
    
    As Restated2007
    
    
    Adjustments
    
    
    2007
    
    
    2006
    
    
    Restatements
    
    
    2006Cost of sales
    
    $
    8,157,684
    
    
    $
    2,622
    
    
    $
    8,160,306
    
    
    $
    6,441,368
    
    
    $
    2,143
    
    
    $
    6,443,511Gross profit
    
    
    767,211
    
    
    
    (2,622
    )
    
    
    764,589
    
    
    
    660,921
    
    
    
    (2,143
    )
    
    
    658,778Selling, general and administrative
    
    
    622,231
    
    
    
    1,295
    
    
    
    623,526
    
    
    
    515,557
    
    
    
    947
    
    
    
    516,504Restructuring and Impairment
charges
    
    
    3,970
    
    
    
    
    
    
    
    3,970
    
    
    
    21,169
    
    
    
    19,344
    
    
    
    40,513Earnings from operations
    
    
    146,951
    
    
    
    (3,917
    )
    
    
    143,034
    
    
    
    124,195
    
    
    
    (22,434
    )
    
    
    101,761Interest expense
    
    
    48,918
    
    
    
    727
    
    
    
    49,645
    
    
    
    58,360
    
    
    
    698
    
    
    
    59,058Other (income) expense, net
    
    
    (37,157
    )
    
    
    
    
    
    
    (37,157
    )
    
    
    (18,791
    )
    
    
    1,402
    
    
    
    (17,389
    )Earnings before income taxes
    
    
    201,904
    
    
    
    (4,644
    )
    
    
    197,260
    
    
    
    96,851
    
    
    
    (24,534
    )
    
    
    72,317Income tax expense
    
    
    38,107
    
    
    
    (1,776
    )
    
    
    36,331
    
    
    
    7,906
    
    
    
    (4,962
    )
    
    
    2,944Net earnings
    
    
    163,797
    
    
    
    (2,868
    )
    
    
    160,929
    
    
    
    88,945
    
    
    
    (19,572
    )
    
    
    69,373Applied to:Retained earnings
    
    
    61,154
    
    
    
    (2,868
    )
    
    
    58,286
    
    
    
    13,928
    
    
    
    (19,572
    )
    
    
    (5,644
    )
  PreviouslyReported
    
    
    Effect of
    
    
    As Adjusted2007
    
    
    Adjustments
    
    
    2007Total current assets
    
    $
    3,020,272
    
    
    $
    1,627
    
    
    $
    3,021,899Investments
    
    
    303,978
    
    
    
    35
    
    
    
    304,013Property, plant and equipment, net
    
    
    551,752
    
    
    
    13,541
    
    
    
    565,293Goodwill, net
    
    
    318,224
    
    
    
    (37,282
    )
    
    
    280,942Other intangibles, net
    
    
    119,167
    
    
    
    5,837
    
    
    
    125,004Other assets
    
    
    118,438
    
    
    
    3,606
    
    
    
    122,044Total assets
    
    
    4,431,831
    
    
    
    (12,636
    )
    
    
    4,419,195Total current liabilities
    
    
    2,579,486
    
    
    
    1,845
    
    
    
    2,581,331Long-term debt
    
    
    611,602
    
    
    
    (24,693
    )
    
    
    586,909Employee benefits and other liabilities
    
    
    202,400
    
    
    
    28,044
    
    
    
    230,444Retained earnings
    
    
    155,272
    
    
    
    (17,832
    )
    
    
    137,440Total equities
    
    
    1,032,168
    
    
    
    (17,832
    )
    
    
    1,014,336Total liabilities and equities
    
    
    4,431,831
    
    
    
    (12,636
    )
    
    
    4,419,195
  Previously
    
    
    
    
    
    
    
    
    
    
    PreviouslyReported
    
    
    Effect of
    
    
    As Adjusted
    
    
    Reported
    
    
    Effect of
    
    
    As Restated2007
    
    
    Adjustments
    
    
    2007
    
    
    2006
    
    
    Restatements
    
    
    2006Retained earnings
    
    $
    155,272
    
    
    $
    (17,832
    )
    
    $
    137,440
    
    
    $
    92,992
    
    
    $
    (14,964
    )
    
    $
    78,028Total equities
    
    
    1,032,168
    
    
    
    (17,832
    )
    
    
    1,014,336
    
    
    
    932,727
    
    
    
    (14,964
    )
    
    
    917,763
 -99-




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Previously
    
    
    
    
    
    
    
    
    
    
    PreviouslyReported
    
    
    Effect of
    
    
    As Adjusted
    
    
    Reported
    
    
    Effect of
    
    
    As Restated2007
    
    
    Adjustments
    
    
    2007
    
    
    2006
    
    
    Restatements
    
    
    2006Net earnings
    
    $
    163,797
    
    
    $
    (2,868
    )
    
    $
    160,929
    
    
    $
    88,945
    
    
    $
    (19,572
    )
    
    $
    69,373Depreciation and amortization
    
    
    84,140
    
    
    
    1,420
    
    
    
    85,560
    
    
    
    95,239
    
    
    
    1,839
    
    
    
    97,078Amortization of deferred financing costs
    
    
    2,253
    
    
    
    728
    
    
    
    2,981
    
    
    
    2,226
    
    
    
    698
    
    
    
    2,924Bad debt expense
    
    
    22,579
    
    
    
    239
    
    
    
    22,818
    
    
    
    1,421
    
    
    
    285
    
    
    
    1,706Deferred income tax benefit
    
    
    (29,655
    )
    
    
    (1,776
    )
    
    
    (31,431
    )
    
    
    13,500
    
    
    
    (4,962
    )
    
    
    8,538Increase in other liabilities
    
    
    1,975
    
    
    
    2,181
    
    
    
    4,156
    
    
    
    2,895
    
    
    
    2,373
    
    
    
    5,268Restructuring and impairment charges
    
    
    3,970
    
    
    
    
    
    
    
    3,970
    
    
    
    21,169
    
    
    
    19,344
    
    
    
    40,513Gain from divestiture of businesses
    
    
    (28,474
    )
    
    
    
    
    
    
    (28,474
    )
    
    
    (8,987
    )
    
    
    1,402
    
    
    
    (7,585
    )Other
    
    
    (3,638
    )
    
    
    
    
    
    
    (3,638
    )
    
    
    (3,610
    )
    
    
    (401
    )
    
    
    (4,011
    )Changes in receivables
    
    
    (294,145
    )
    
    
    132
    
    
    
    (294,013
    )
    
    
    38,156
    
    
    
    673
    
    
    
    38,829Changes in other current assets
    
    
    (512,438
    )
    
    
    759
    
    
    
    (511,679
    )
    
    
    (60,948
    )
    
    
    649
    
    
    
    (60,299
    )Changes in accrued liabilities
    
    
    74,619
    
    
    
    1,366
    
    
    
    75,985
    
    
    
    59,332
    
    
    
    1,045
    
    
    
    60,377Net cash provided by operating
activities
    
    
    328,778
    
    
    
    2,181
    
    
    
    330,959
    
    
    
    196,530
    
    
    
    3,373
    
    
    
    199,903Increase (decrease) in short-term debt
    
    
    75,399
    
    
    
    
    
    
    
    75,399
    
    
    
    (98,541
    )
    
    
    (1,000
    )
    
    
    (99,541
    )Proceeds on issuance of long-term debt
    
    
    8,337
    
    
    
    (2,547
    )
    
    
    5,790
    
    
    
    16,451
    
    
    
    (2,741
    )
    
    
    13,710Principal payments on long-term debt
and capital lease obligations
    
    
    (41,798
    )
    
    
    366
    
    
    
    (41,432
    )
    
    
    (36,549
    )
    
    
    368
    
    
    
    (36,181
    )Net cash used by financing activities
    
    
    (16,362
    )
    
    
    (2,181
    )
    
    
    (18,543
    )
    
    
    (195,863
    )
    
    
    (3,373
    )
    
    
    (199,236
    )
 2. Significant Accounting Policies
 Use of Estimates
  Revenue Recognition
   Advertising and Promotion Costs
  -100-




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Research and Development
  Share-Based Compensation
  Income Taxes
   Cash and Cash Equivalents
  Vendor Rebates Receivable
  Inventories
  Vendor Prepayments
  Derivative Commodity Instruments
  -101-




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Investments
  Property, Plant and Equipment
  Goodwill and Other Intangible Assets
    Recoverability of Long-Lived Assets
   3. Recent Accounting Pronouncements
  -102-




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-103-




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4. Business Combinations
 2008 Acquisitions
  2007 Acquisitions
  -104-




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##### Table of Contents



Receivables
    
    $
    104,096Inventories
    
    
    307,152Other current assets
    
    
    712Property, plant and equipment
    
    
    30,338Goodwill
    
    
    27,079Other intangibles
    
    
    27,051Investments
    
    
    1,325Other assets
    
    
    307Accounts payable
    
    
    (32,633
    )Accrued liabilities
    
    
    (58,939
    )Employee benefits and other liabilities
    
    
    (10,174
    )Net assets distributed and acquired
    
    $
    396,314
    Pro forma(unaudited)2007
    
    2006Net sales
    
    $
    9,899,095
    
    
    $
    8,270,020Net earnings
    
    
    149,241
    
    
    
    108,468
  -105-




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##### Table of Contents



2006 Acquisitions
  5. Receivables
  2008
    
    2007Trade accounts
    
    $
    846,794
    
    
    $
    834,070Notes and contracts
    
    
    89,736
    
    
    
    92,207Vendor rebates
    
    
    57,007
    
    
    
    26,050Other
    
    
    130,591
    
    
    
    68,7291,124,128
    
    
    
    1,021,056Less allowance for doubtful accounts
    
    
    (19,867
    )
    
    
    (14,125
    )Total receivables, net
    
    $
    1,104,261
    
    
    $
    1,006,931
     6. Inventories
  2008
    
    2007Raw materials
    
    $
    217,087
    
    
    $
    190,586Work in process
    
    
    1,639
    
    
    
    5,058Finished goods
    
    
    865,252
    
    
    
    768,871Total inventories
    
    $
    1,083,978
    
    
    $
    964,515
 -106-




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7. Investments
  2008
    
    2007Agriliance LLC
    
    $
    176,191
    
    
    $
    150,945Advanced Food Products, LLC
    
    
    33,870
    
    
    
    34,287Ag Processing Inc
    
    
    31,858
    
    
    
    32,832Delta Egg Farm, LLC
    
    
    11,464
    
    
    
    7,614Universal Cooperatives, Inc.
    
    
    7,877
    
    
    
    7,802Melrose Dairy Proteins, LLC
    
    
    6,397
    
    
    
    3,856CoBank, ACB
    
    
    4,892
    
    
    
    4,396Hi-Plains, LLC
    
    
    3,244
    
    
    
    1,902Wilco-Winfield, LLC
    
    
    3,131
    
    
    
    Prairie Farms Dairy, Inc.
    
    
    2,954
    
    
    
    3,518Agronomy Company of Canada Ltd.
    
    
    
    
    
    
    21,909Other  principally cooperatives and joint ventures
    
    
    32,609
    
    
    
    34,952Total investments
    
    $
    314,487
    
    
    $
    304,013
     Agriliance LLC
    
    2008
    
    2007Net sales
    
    $
    926,712
    
    
    $
    3,447,217Gross profit
    
    
    134,146
    
    
    
    447,630Net earnings
    
    
    1,096
    
    
    
    102,485Current assets
    
    
    450,709
    
    
    
    696,332Non-current assets
    
    
    21,863
    
    
    
    66,099Current liabilities
    
    
    108,298
    
    
    
    426,674Non-current liabilities
    
    
    11,892
    
    
    
    33,867Total equity
    
    
    352,382
    
    
    
    301,890
    -107-




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##### Table of Contents



8. Property, Plant and Equipment
  2008
    
    2007Machinery and equipment
    
    $
    668,279
    
    
    $
    606,245Buildings and building equipment
    
    
    393,156
    
    
    
    372,072Land and land improvements
    
    
    68,977
    
    
    
    64,962Software
    
    
    102,570
    
    
    
    89,242Construction in progress
    
    
    93,402
    
    
    
    35,1431,326,384
    
    
    
    1,167,664Less accumulated depreciation
    
    
    668,123
    
    
    
    602,371Total property, plant and equipment, net
    
    $
    658,261
    
    
    $
    565,293
 9. Goodwill and Other Intangible Assets
 Goodwill
  2008
    
    2007Feed
    
    $
    126,959
    
    
    $
    127,404Dairy Foods
    
    
    68,525
    
    
    
    69,451Agronomy
    
    
    50,663
    
    
    
    52,371Layers
    
    
    20,347
    
    
    
    20,998Seed
    
    
    10,682
    
    
    
    10,718Total goodwill
    
    $
    277,176
    
    
    $
    280,942
  Other Intangible Assets
  2008
    
    2007Amortized other intangible assets:Dealer networks and customer relationships, less accumulated amortization of
$4,045 and $1,627, respectively
    
    $
    50,478
    
    
    $
    51,822Patents, less accumulated amortization of $8,414 and $7,250, respectively
    
    
    8,297
    
    
    
    9,461Trademarks, less accumulated amortization of $2,668 and $1,976, respectively
    
    
    4,946
    
    
    
    5,639Other
intangible assets, less accumulated amortization of $4,412 and $4,863, respectively
    
    
    5,636
    
    
    
    6,457Total amortized other intangible assets
    
    
    69,357
    
    
    
    73,379Total non-amortized other intangible assets  trademarks and license agreements
    
    
    51,625
    
    
    
    51,625Total other intangible assets
    
    $
    120,982
    
    
    $
    125,004
  -108-




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##### Table of Contents



10. Accrued Liabilities
  2008
    
    2007Employee compensation and benefits
    
    $
    141,376
    
    
    $
    116,249Unrealized hedging losses and deferred option premiums received
    
    
    99,964
    
    
    
    31,679Marketing programs and consumer incentives
    
    
    70,209
    
    
    
    63,157Other
    
    
    111,945
    
    
    
    130,336Total accrued liabilities
    
    $
    423,494
    
    
    $
    341,421
  11. Debt Obligations
 Notes and Short-term Obligations
      -109-




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##### Table of Contents



Long-term Debt
  2008
    
    2007Senior unsecured notes, due 2011 (8.75%)
    
    $
    174,002
    
    
    $
    192,743Senior secured notes, due 2010 (9.00%)
    
    
    149,700
    
    
    
    175,000Capital Securities of Trust Subsidiary, due 2028 (7.45%)
    
    
    190,700
    
    
    
    190,700MoArk, LLC debt, due 2009 through 2023 (8.53% weighted average)
    
    
    15,449
    
    
    
    26,490MoArk Capital lease obligations (6.00% to 8.25%)
    
    
    4,668
    
    
    
    6,000Other debt, including discounts and fair value adjustments
    
    
    300
    
    
    
    (942
    )534,819
    
    
    
    589,991Less current portion
    
    
    2,864
    
    
    
    3,082Total long-term debt
    
    $
    531,955
    
    
    $
    586,909
      -110-




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##### Table of Contents



Year
    
    Amount2009
    
    $
    2,8642010
    
    
    152,4442011
    
    
    175,9672012
    
    
    1,3432013
    
    
    1,2882014 and thereafter
    
    
    200,913
 12. Other Comprehensive Income
 (Restated)2008
    
    2007
    
    2006Net earnings
    
    $
    159,620
    
    
    $
    160,929
    
    
    $
    69,373Pension and other postretirement
adjustments, net of income taxes
of $52,858, $(39,871) and
$(5,734), respectively
    
    
    (85,333
    )
    
    
    64,366
    
    
    
    9,108Unrealized (loss) gain on
available-for-sale securities, net
of income taxes of $5, $0 and $0,
respectively
    
    
    (266
    )
    
    
    275
    
    
    
    (404
    )Foreign currency translation
adjustment, net of income taxes of
$1,905, $(1,329) and $(113),
respectively
    
    
    (3,076
    )
    
    
    2,146
    
    
    
    183Total comprehensive income
    
    $
    70,945
    
    
    $
    227,716
    
    
    $
    78,260
   2008
    
    2007Pension and other postretirement adjustments,
net of income taxes of $93,293 and $40,639,
respectively
    
    $
    (150,610
    )
    
    $
    (65,606
    )Unrealized gain on available-for-sale
securities, net of income taxes of $(5) and $0,
respectively
    
    
    9
    
    
    
    275Foreign currency translation adjustment, net of
income taxes of $(201) and $(2,106),
respectively
    
    
    324
    
    
    
    3,400Accumulated other comprehensive loss
    
    $
    (150,277
    )
    
    $
    (61,931
    )
 -111-




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##### Table of Contents



13. Fair Value Measurement of Financial Instruments
  2008
    
    2007Carrying Amount
    
    Fair Value
    
    Carrying Amount
    
    Fair ValueFinancial Derivatives:Commodity derivative assets
    
    $
    50,053
    
    
    $
    50,053
    
    
    $
    30,671
    
    
    $
    30,671Commodity derivative liabilities
    
    
    85,292
    
    
    
    85,292
    
    
    
    13,331
    
    
    
    13,331Foreign currency exchange contract assets
    
    
    342
    
    
    
    342
    
    
    
    15
    
    
    
    15Foreign currency exchange contract liabilities
    
    
    925
    
    
    
    925
    
    
    
    
    
    
    
    Loans receivable
    
    
    137,869
    
    
    
    140,762
    
    
    
    124,346
    
    
    
    124,332Available-for-sale securities
    
    
    47
    
    
    
    47
    
    
    
    488
    
    
    
    488Debt:Senior unsecured notes, due 2011
    
    
    174,002
    
    
    
    161,410
    
    
    
    192,743
    
    
    
    200,812Senior secured notes, due 2010
    
    
    149,700
    
    
    
    150,999
    
    
    
    175,000
    
    
    
    188,885Capital Securities of Trust Subsidiary, due 2028
    
    
    190,700
    
    
    
    107,580
    
    
    
    190,700
    
    
    
    165,455MoArk fixed rate debt
    
    
    20,117
    
    
    
    17,548
    
    
    
    32,490
    
    
    
    33,633
       -112-




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##### Table of Contents



SFAS No. 157, Fair Value Measurements
    Level 1:inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities.Level 2:inputs are quoted prices for similar assets and liabilities in active markets or
inputs that are observable for the asset or liability, either directly or indirectly through
market corroboration, for substantially the full term of the financial instrument.Level 3:inputs are unobservable inputs based on the Companys own assumptions used to
measure assets and liabilities at fair value.
  Fair Value Measurements at December 31, 2008 Using:SignificantQuoted prices
    
    other
    
    SignificantTotal carrying
    
    in active
    
    observable
    
    unobservablevalue at
    
    markets
    
    inputs
    
    inputsDecember 31, 2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Commodity derivative assets
    
    $
    50,053
    
    
    $
    49,139
    
    
    $
    914
    
    
    $
    Commodity derivative liabilities
    
    
    85,292
    
    
    
    85,128
    
    
    
    164
    
    
    
    Foreign currency exchange contract assets
    
    
    342
    
    
    
    
    
    
    
    342
    
    
    
    Foreign currency exchange contract liabilities
    
    
    925
    
    
    
    
    
    
    
    925
    
    
    
    Available-for-sale securities
    
    
    47
    
    
    
    47
    
    
    
    
    
    
    
    
  14. Income Taxes
  (Restated)2008
    
    2007
    
    2006Current expense:Federal
    
    $
    16,516
    
    
    $
    59,354
    
    
    $
    (6,801
    )State
    
    
    3,409
    
    
    
    8,408
    
    
    
    1,16319,925
    
    
    
    67,762
    
    
    
    (5,638
    )Deferred benefit:Federal
    
    
    (4,689
    )
    
    
    (26,797
    )
    
    
    7,882State
    
    
    (728
    )
    
    
    (4,634
    )
    
    
    700(5,417
    )
    
    
    (31,431
    )
    
    
    8,582Income tax expense
    
    $
    14,508
    
    
    $
    36,331
    
    
    $
    2,944
 -113-




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(Restated)2008
    
    2007
    
    2006Statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Patronage refunds
    
    
    (22.9
    )
    
    
    (17.2
    )
    
    
    (29.9
    )State income tax, net of federal benefit
    
    
    1.0
    
    
    
    1.2
    
    
    
    1.7Amortization of goodwill
    
    
    0.3
    
    
    
    0.7
    
    
    
    18.6Effect of foreign operations
    
    
    0.5
    
    
    
    (0.1
    )
    
    
    (1.4
    )Disposal of investment
    
    
    0.5
    
    
    
    (0.1
    )
    
    
    (1.3
    )Additional tax (benefit) expense
    
    
    (1.9
    )
    
    
    0.4
    
    
    
    (17.5
    )Meals and entertainment
    
    
    0.7
    
    
    
    1.1
    
    
    
    1.6Tax credits
    
    
    (0.7
    )
    
    
    (0.5
    )
    
    
    (1.1
    )Section 199 manufacturing deduction
    
    
    (4.3
    )
    
    
    (1.8
    )
    
    
    (1.3
    )Other, net
    
    
    0.1
    
    
    
    (0.3
    )
    
    
    (0.3
    )Effective tax rate
    
    
    8.3
    %
    
    
    18.4
    %
    
    
    4.1
    %
  2008
    
    2007Deferred tax assets related to:Deferred patronage
    
    $
    40,507
    
    
    $
    38,370Accrued liabilities
    
    
    156,064
    
    
    
    89,124Allowance for doubtful accounts
    
    
    6,930
    
    
    
    12,248Asset impairments
    
    
    7,592
    
    
    
    8,808Inventories
    
    
    11,592
    
    
    
    Joint ventures
    
    
    20,811
    
    
    
    26,002Loss carryforwards
    
    
    12,646
    
    
    
    8,301Deferred revenue
    
    
    3,323
    
    
    
    5,692Gross deferred tax assets
    
    
    259,465
    
    
    
    188,545Valuation allowance
    
    
    (16,620
    )
    
    
    (16,082
    )Total deferred tax assets
    
    
    242,845
    
    
    
    172,463Deferred tax liabilities related to:Property, plant and equipment
    
    
    91,103
    
    
    
    80,040Inventories
    
    
    
    
    
    
    9,461Intangibles
    
    
    29,128
    
    
    
    23,697Other, net
    
    
    11,534
    
    
    
    4,638Total deferred tax liabilities
    
    
    131,765
    
    
    
    117,836Net deferred tax assets
    
    $
    111,080
    
    
    $
    54,627
  -114-




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##### Table of Contents



2008
    
    2007Other current assets
    
    $
    59,528
    
    
    $
    40,879Other assets
    
    
    51,552
    
    
    
    13,748Total net deferred tax assets
    
    $
    111,080
    
    
    $
    54,627
   Gross unrecognized tax benefits at January 1, 2008
    
    $
    17,187Increases in tax positions for current year
    
    
    853Increases in tax positions for prior years
    
    
    1,614Gross unrecognized tax benefits at December 31, 2008
    
    $
    19,654
     15. Pension and Other Postretirement Plans
   -115-




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##### Table of Contents



2007Pre-SFAS 158with AdditionalMinimum
    
    
    SFAS 158
    
    
    2007Liability (AML)
    
    
    Adoption
    
    
    PostAdjustments
    
    
    Adjustments
    
    
    SFAS 158Investments
    
    $
    305,297
    
    
    $
    (1,284
    )
    
    $
    304,013Other assets
    
    
    84,161
    
    
    
    37,883
    
    
    
    122,044Employee benefits and other liabilities
    
    
    131,403
    
    
    
    99,041
    
    
    
    230,444Accumulated other comprehensive income
(loss), net of income tax
    
    
    511
    
    
    
    (62,442
    )
    
    
    (61,931
    )Accumulated other comprehensive loss, pretax
    
    
    (5,123
    )
    
    
    (101,122
    )
    
    
    (106,245
    )
  Obligation and Funded Status at December 31
 Pension BenefitsQualified Plan
    
    Non-qualified Plans2008
    
    2007
    
    2008
    
    2007Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    508,707
    
    
    $
    539,631
    
    
    $
    51,102
    
    
    $
    55,425Service cost
    
    
    14,251
    
    
    
    13,725
    
    
    
    438
    
    
    
    540Interest cost
    
    
    32,523
    
    
    
    30,103
    
    
    
    3,209
    
    
    
    3,080Plan amendments
    
    
    
    
    
    
    
    
    
    
    114
    
    
    
    SFAS 158 measurement date change
    
    
    3,898
    
    
    
    
    
    
    
    304
    
    
    
    Actuarial (gain) loss
    
    
    (22,639
    )
    
    
    (53,198
    )
    
    
    1,816
    
    
    
    (3,673
    )Benefits paid
    
    
    (24,941
    )
    
    
    (21,554
    )
    
    
    (4,617
    )
    
    
    (4,270
    )Benefit obligation at end of year
    
    $
    511,799
    
    
    $
    508,707
    
    
    $
    52,366
    
    
    $
    51,102Change in plan assets:Fair value of plan assets
at beginning of year
    
    $
    519,869
    
    
    $
    478,317
    
    
    $
    
    
    
    $
    Actual (loss) gain on plan assets
    
    
    (133,099
    )
    
    
    43,106
    
    
    
    
    
    
    
    Company contributions
    
    
    25,000
    
    
    
    20,000
    
    
    
    4,617
    
    
    
    4,270Benefits paid
    
    
    (24,941
    )
    
    
    (21,554
    )
    
    
    (4,617
    )
    
    
    (4,270
    )Fair value of plan assets at end of year
    
    $
    386,829
    
    
    $
    519,869
    
    
    $
    
    
    
    $
    Amounts recognized in the consolidated balance sheets consist of:Other assets
    
    $
    
    
    
    $
    11,162
    
    
    $
    
    
    
    $
    Accrued liabilities
    
    
    
    
    
    
    
    
    
    
    (4,557
    )
    
    
    (4,287
    )Employee benefits and other liabilities
    
    
    (124,970
    )
    
    
    
    
    
    
    (47,809
    )
    
    
    (46,815
    )Net amount recognized
    
    $
    (124,970
    )
    
    $
    11,162
    
    
    $
    (52,366
    )
    
    $
    (51,102
    )Amounts recognized in accumulated other comprehensive income (pretax) as of December 31, consists of:Prior service cost
    
    $
    351
    
    
    $
    432
    
    
    $
    (791
    )
    
    $
    (1,514
    )Net loss
    
    
    218,902
    
    
    
    68,615
    
    
    
    11,109
    
    
    
    10,067Ending balance
    
    $
    219,253
    
    
    $
    69,047
    
    
    $
    10,318
    
    
    $
    8,553
 -116-




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##### Table of Contents



Pension BenefitsQualified Plan
    
    Non-qualified Plans2008
    
    2007
    
    2008
    
    2007Projected benefit obligation
    
    $
    511,799
    
    
    $
    508,707
    
    
    $
    52,366
    
    
    $
    51,102Fair value of plan assets
    
    
    386,829
    
    
    
    519,869
    
    
    
    
    
    
    
    Funded status at end of measurement date
    
    $
    (124,970
    )
    
    $
    11,162
    
    
    $
    (52,366
    )
    
    $
    (51,102
    )
 Obligation and Funded Status at December 31
 Other Postretirement Benefits2008
    
    2007Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    62,600
    
    
    $
    71,972Service cost
    
    
    724
    
    
    
    729Interest cost
    
    
    3,953
    
    
    
    3,923Plan amendments
    
    
    
    
    
    
    Plan participants contributions
    
    
    2,838
    
    
    
    2,774Medicare Part D reimbursements
    
    
    1,010
    
    
    
    545SFAS 158 measurement date change
    
    
    390
    
    
    
    Actuarial gain
    
    
    (9,527
    )
    
    
    (10,323
    )Benefits paid
    
    
    (7,211
    )
    
    
    (7,020
    )Benefit obligation at end of year
    
    $
    54,777
    
    
    $
    62,600Change in plan assets:Company contributions
    
    $
    4,373
    
    
    $
    4,246Plan participants contributions
    
    
    2,838
    
    
    
    2,774Benefits paid
    
    
    (7,211
    )
    
    
    (7,020
    )Fair value of plan assets at end of year
    
    $
    
    
    
    $
    Amounts recognized in the consolidated
balance sheets consist of:Accrued liabilities
    
    $
    (4,438
    )
    
    $
    (4,575
    )Employee benefits and other liabilities
    
    
    (50,339
    )
    
    
    (58,025
    )Net amount recognized
    
    $
    (54,777
    )
    
    $
    (62,600
    )Amounts recognized in accumulated other
comprehensive income (pretax) consists of:Net transition obligation
    
    $
    1,675
    
    
    $
    2,138Net loss
    
    
    12,470
    
    
    
    23,953Ending Balance
    
    $
    14,145
    
    
    $
    26,091
  2008
    
    2007Accumulated benefit obligation
    
    $
    54,777
    
    
    $
    62,600Fair value of plan assets
    
    
    
    
    
    
    Funded status at end of measurement date
    
    $
    (54,777
    )
    
    $
    (62,600
    )
 -117-




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##### Table of Contents



Pension Benefits
    
    Other Postretirement Benefits2008
    
    2007
    
    2006
    
    2008
    
    2007
    
    2006Service cost
    
    $
    14,689
    
    
    $
    14,265
    
    
    $
    19,081
    
    
    $
    724
    
    
    $
    729
    
    
    $
    666Interest cost
    
    
    35,733
    
    
    
    33,183
    
    
    
    32,153
    
    
    
    3,953
    
    
    
    3,923
    
    
    
    3,990Expected return on assets
    
    
    (40,814
    )
    
    
    (37,601
    )
    
    
    (35,040
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of actuarial loss
    
    
    4,763
    
    
    
    12,946
    
    
    
    14,134
    
    
    
    1,805
    
    
    
    2,943
    
    
    
    2,615Amortization of prior service cost
    
    
    (487
    )
    
    
    (487
    )
    
    
    (469
    )
    
    
    
    
    
    
    
    
    
    
    266Curtailment
    
    
    
    
    
    
    
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    Amortization of transition
obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    428
    
    
    
    428
    
    
    
    643Net periodic benefit cost
    
    $
    13,884
    
    
    $
    22,306
    
    
    $
    30,034
    
    
    $
    6,910
    
    
    $
    8,023
    
    
    $
    8,180
 Additional Information
  Other PostretirementPension Benefits
    
    Benefits2008
    
    2007
    
    2008
    
    2007Discount rate
    
    
    6.90
    %
    
    
    6.55
    %
    
    
    6.90
    %
    
    
    6.55
    %Rate of compensation increase
    
    
    4.25
    %
    
    
    4.50
    %
    
    
    N/A
    
    
    
    N/A
  Pension Benefits
    
    Other Postretirement Benefits2008
    
    2007
    
    2006
    
    2008
    
    2007
    
    2006Discount rate
    
    
    6.55
    %
    
    
    5.70
    %
    
    
    5.75
    %
    
    
    6.55
    %
    
    
    5.70
    %
    
    
    5.75
    %Rate of long-term return on plan assets
    
    
    8.25
    %
    
    
    8.25
    %
    
    
    8.25
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ARate of compensation increase
    
    
    4.50
    %
    
    
    4.25
    %
    
    
    4.25
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
   2008
    
    2007Health care cost trend rate assumed for next year
    
    
    9.25
    %
    
    
    10.00
    %Rate to which the cost trend is assumed to decline (ultimate trend rate)
    
    
    5.00
    %
    
    
    5.00
    %Year that rate reaches ultimate trend rate
    
    
    2015
    
    
    
    2015
  1 percentage point
    
    1 percentage pointincrease
    
    decreaseEffect on total of service and interest cost
    
    $
    227
    
    
    $
    (203
    )Effect on postretirement benefit obligation
    
    
    3,285
    
    
    
    (2,939
    )
 -118-




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##### Table of Contents



Plan Assets
  Asset category
    
    2008
    
    2007
    
    TargetU.S. equity securities
    
    
    41
    %
    
    
    49
    %
    
    
    50
    %International equity securities
    
    
    12
    %
    
    
    15
    %
    
    
    15
    %Fixed income securities and bonds
    
    
    47
    %
    
    
    36
    %
    
    
    35
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    Cash Flow
   Other
    
    HealthQualified
    
    Non-qualified
    
    Postretirement
    
    Care SubsidyPension Plan
    
    Pension Plans
    
    Benefits
    
    Receipts2009
    
    $
    26,000
    
    
    $
    4,500
    
    
    $
    5,400
    
    
    $
    (1,000
    )2010
    
    
    28,000
    
    
    
    4,700
    
    
    
    5,700
    
    
    
    (1,100
    )2011
    
    
    29,000
    
    
    
    4,800
    
    
    
    6,000
    
    
    
    (1,200
    )2012
    
    
    31,000
    
    
    
    3,800
    
    
    
    6,200
    
    
    
    (1,300
    )2013
    
    
    34,000
    
    
    
    4,200
    
    
    
    6,300
    
    
    
    (1,400
    )2014-2018
    
    
    206,000
    
    
    
    23,800
    
    
    
    32,200
    
    
    
    (8,400
    )
 Other Benefit Plans
   -119-




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16. Share-Based Compensation
      -120-




---



##### Table of Contents



17. Equities
  The following table reflects the activity in membership shares during the three years ended
December 31, 2008:
  Common
    
    PreferredA
    
    B
    
    C
    
    DDecember 31, 2005
    
    
    1,004
    
    
    
    4,118
    
    
    
    175
    
    
    
    1,024
    
    
    
    78,316New members
    
    
    2
    
    
    
    234
    
    
    
    
    
    
    
    203
    
    
    
    Redemptions
    
    
    (47
    )
    
    
    (326
    )
    
    
    (8
    )
    
    
    (204
    )
    
    
    (8,632
    )December 31, 2006
    
    
    959
    
    
    
    4,026
    
    
    
    167
    
    
    
    1,023
    
    
    
    69,684New members
    
    
    4
    
    
    
    251
    
    
    
    2
    
    
    
    228
    
    
    
    Redemptions
    
    
    (54
    )
    
    
    (348
    )
    
    
    (6
    )
    
    
    (195
    )
    
    
    (7,268
    )December 31, 2007
    
    
    909
    
    
    
    3,929
    
    
    
    163
    
    
    
    1,056
    
    
    
    62,416New members
    
    
    9
    
    
    
    291
    
    
    
    5
    
    
    
    244
    
    
    
    Redemptions
    
    
    (46
    )
    
    
    (347
    )
    
    
    (4
    )
    
    
    (290
    )
    
    
    (5,391
    )December 31, 2008
    
    
    872
    
    
    
    3,873
    
    
    
    164
    
    
    
    1,010
    
    
    
    57,025
   18. Restructuring and Impairment Charges
 (Restated)2008
    
    2007
    
    2006Restructuring charges
    
    $
    1,760
    
    
    $
    460
    
    
    $
    1,482Impairment charges
    
    
    1,133
    
    
    
    3,510
    
    
    
    39,031Total restructuring and impairment charges
    
    $
    2,893
    
    
    $
    3,970
    
    
    $
    40,513
 Restructuring charges
    -121-




---



##### Table of Contents



Impairment charges
    19. Gain on Insurance Settlement
   20. Other Income
 (Restated)2008
    
    2007
    
    2006Gain on sale of investments
    
    $
    (7,458
    )
    
    $
    (8,683
    )
    
    $
    (7,980
    )Gain on foreign currency exchange contracts
    
    
    (4,191
    )
    
    
    
    
    
    
    Gain on extinguishment of debt
    
    
    (379
    )
    
    
    
    
    
    
    Gain on divestiture of businesses
    
    
    
    
    
    
    (28,474
    )
    
    
    (7,585
    )Gain on sale of intangibles
    
    
    
    
    
    
    
    
    
    
    (1,824
    )Total
    
    $
    (12,028
    )
    
    $
    (37,157
    )
    
    $
    (17,389
    )
  -122-




---



##### Table of Contents



21. Commitments and Contingencies
        -123-




---



##### Table of Contents



-124-




---



##### Table of Contents



22. Segment Information
  LAND
O LAKES Indian Maiden Alpine Lace New
Yorker
        Previously
    
    
    
    
    
    
    
    
    
    PreviouslyReported
    
    Effect of
    
    As Adjusted
    
    Reported
    
    Effect of
    
    As Restated2007
    
    Adjustments
    
    2007
    
    2006
    
    Restatements
    
    2006Cost of sales
    
    $
    434,168
    
    
    $
    2,589
    
    
    $
    436,757
    
    
    $
    377,031
    
    
    
    2,143
    
    
    
    379,174Selling, general and administrative
    
    
    52,737
    
    
    
    1,328
    
    
    
    54,065
    
    
    
    31,442
    
    
    
    947
    
    
    
    32,389Restructuring and impairment
charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,814
    
    
    
    19,344
    
    
    
    36,158Interest expense
    
    
    14,898
    
    
    
    727
    
    
    
    15,625
    
    
    
    17,210
    
    
    
    698
    
    
    
    17,908Other (income) expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,033
    )
    
    
    1,402
    
    
    
    (6,631
    )Earnings (loss) before income taxes
    
    
    24,587
    
    
    
    (4,644
    )
    
    
    19,943
    
    
    
    (40,153
    )
    
    
    (24,534
    )
    
    
    (64,687
    )Total assets
    
    
    288,134
    
    
    
    (16,421
    )
    
    
    271,713
    
    
    
    262,159
    
    
    
    (13,911
    )
    
    
    248,248Depreciation and amortization
    
    
    8,078
    
    
    
    1,420
    
    
    
    9,498
    
    
    
    8,739
    
    
    
    1,839
    
    
    
    10,578
 -125-




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##### Table of Contents



TotalOther/Dairy Foods
    
    
    Feed
    
    
    Seed
    
    
    Agronomy
    
    
    Layers
    
    
    Eliminated
    
    
    ConsolidatedFor the year ended December 31, 2008:Net sales
    
    $
    4,136,389
    
    
    $
    3,857,411
    
    
    $
    1,185,008
    
    
    $
    2,335,274
    
    
    $
    606,242
    
    
    $
    (81,065
    )
    
    $
    12,039,259Cost of sales(1)
    
    
    3,922,833
    
    
    
    3,570,914
    
    
    
    1,068,795
    
    
    
    2,059,411
    
    
    
    535,073
    
    
    
    (73,116
    )
    
    
    11,083,910Selling, general and administrative
    
    
    188,355
    
    
    
    263,435
    
    
    
    88,827
    
    
    
    149,698
    
    
    
    51,348
    
    
    
    14,943
    
    
    
    756,606Restructuring and impairment charges
    
    
    179
    
    
    
    1,771
    
    
    
    
    
    
    
    
    
    
    
    943
    
    
    
    
    
    
    
    2,893Gain on insurance settlement
    
    
    
    
    
    
    (6,606
    )
    
    
    
    
    
    
    
    
    
    
    (4,032
    )
    
    
    
    
    
    
    (10,638
    )Interest expense (income), net
    
    
    14,293
    
    
    
    30,838
    
    
    
    (4,829
    )
    
    
    15,506
    
    
    
    12,514
    
    
    
    (5,090
    )
    
    
    63,232Other expense (income), net
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    (11,713
    )
    
    
    
    
    
    
    (379
    )
    
    
    (12,028
    )Equity in earnings of affiliated companies
    
    
    (5,538
    )
    
    
    (3,518
    )
    
    
    (1,157
    )
    
    
    (5,295
    )
    
    
    (19,464
    )
    
    
    
    
    
    
    (34,972
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    954
    
    
    
    
    
    
    
    15,174
    
    
    
    
    
    
    
    
    
    
    
    16,128Earnings (loss) before income taxes
    
    $
    16,267
    
    
    $
    (441
    )
    
    $
    33,372
    
    
    $
    112,493
    
    
    $
    29,860
    
    
    $
    (17,423
    )
    
    $
    174,128For the year ended December 31, 2007:Net sales
    
    $
    4,176,844
    
    
    $
    3,061,591
    
    
    $
    917,020
    
    
    $
    287,373
    
    
    $
    513,948
    
    
    $
    (31,881
    )
    
    $
    8,924,895Cost of sales(1)
    
    
    3,899,398
    
    
    
    2,761,697
    
    
    
    799,108
    
    
    
    293,015
    
    
    
    436,757
    
    
    
    (29,669
    )
    
    
    8,160,306Selling, general and administrative
    
    
    194,892
    
    
    
    249,214
    
    
    
    78,118
    
    
    
    42,532
    
    
    
    54,065
    
    
    
    4,705
    
    
    
    623,526Restructuring and impairment charges
    
    
    1,989
    
    
    
    645
    
    
    
    688
    
    
    
    
    
    
    
    648
    
    
    
    
    
    
    
    3,970Gain on insurance settlement
    
    
    
    
    
    
    (5,941
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,941
    )Interest expense (income), net
    
    
    22,278
    
    
    
    25,592
    
    
    
    (4,764
    )
    
    
    (3,318
    )
    
    
    15,625
    
    
    
    (5,768
    )
    
    
    49,645Other (income) expense, net
    
    
    (28,481
    )
    
    
    7
    
    
    
    
    
    
    
    (8,796
    )
    
    
    (72
    )
    
    
    185
    
    
    
    (37,157
    )Equity in earnings of affiliated companies
    
    
    (652
    )
    
    
    (2,030
    )
    
    
    (40
    )
    
    
    (52,436
    )
    
    
    (13,018
    )
    
    
    (7
    )
    
    
    (68,183
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    1,469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,469Earnings (loss) before income taxes
    
    $
    87,420
    
    
    $
    30,938
    
    
    $
    43,910
    
    
    $
    16,376
    
    
    $
    19,943
    
    
    $
    (1,327
    )
    
    $
    197,260For the year ended December 31, 2006 (Restated):Net sales
    
    $
    3,241,251
    
    
    $
    2,711,390
    
    
    $
    755,976
    
    
    $
    
    
    
    $
    398,394
    
    
    $
    (4,722
    )
    
    $
    7,102,289Cost of sales(1)
    
    
    3,001,831
    
    
    
    2,412,747
    
    
    
    648,924
    
    
    
    
    
    
    
    379,174
    
    
    
    835
    
    
    
    6,443,511Selling, general and administrative
    
    
    167,163
    
    
    
    238,026
    
    
    
    67,791
    
    
    
    13,105
    
    
    
    32,389
    
    
    
    (1,970
    )
    
    
    516,504Restructuring and impairment charges
    
    
    4,290
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    36,158
    
    
    
    
    
    
    
    40,513Interest expense (income), net
    
    
    31,915
    
    
    
    25,220
    
    
    
    (638
    )
    
    
    (10,886
    )
    
    
    17,908
    
    
    
    (4,461
    )
    
    
    59,058Other (income) expense, net
    
    
    (9,662
    )
    
    
    (1,097
    )
    
    
    
    
    
    
    
    
    
    
    (6,631
    )
    
    
    1
    
    
    
    (17,389
    )Equity in (earnings) loss of affiliated companies
    
    
    (1,456
    )
    
    
    (1,727
    )
    
    
    (203
    )
    
    
    (14,376
    )
    
    
    4,083
    
    
    
    5
    
    
    
    (13,674
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    1,444
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,449Earnings (loss) before income taxes
    
    $
    47,170
    
    
    $
    36,712
    
    
    $
    40,097
    
    
    $
    12,157
    
    
    $
    (64,687
    )
    
    $
    868
    
    
    $
    72,3172008:Total assets
    
    $
    879,494
    
    
    $
    1,129,037
    
    
    $
    955,753
    
    
    $
    1,513,715
    
    
    $
    269,732
    
    
    $
    233,581
    
    
    $
    4,981,312Intersegment sales
    
    
    8,129
    
    
    
    48,981
    
    
    
    12,569
    
    
    
    21,145
    
    
    
    
    
    
    
    (90,824
    )
    
    
    Depreciation and amortization
    
    
    31,501
    
    
    
    31,951
    
    
    
    2,447
    
    
    
    14,702
    
    
    
    9,198
    
    
    
    2,010
    
    
    
    91,809Capital expenditures
    
    
    84,805
    
    
    
    54,320
    
    
    
    3,047
    
    
    
    4,459
    
    
    
    18,267
    
    
    
    6,446
    
    
    
    171,3442007:Total assets
    
    $
    865,046
    
    
    $
    1,062,686
    
    
    $
    676,510
    
    
    $
    1,291,667
    
    
    $
    271,713
    
    
    $
    251,573
    
    
    $
    4,419,195Intersegment sales
    
    
    23,011
    
    
    
    25,508
    
    
    
    
    
    
    
    2,613
    
    
    
    
    
    
    
    (51,132
    )
    
    
    Depreciation and amortization
    
    
    26,342
    
    
    
    27,756
    
    
    
    2,430
    
    
    
    8,459
    
    
    
    9,498
    
    
    
    11,075
    
    
    
    85,560Capital expenditures
    
    
    18,004
    
    
    
    42,189
    
    
    
    2,012
    
    
    
    290
    
    
    
    5,143
    
    
    
    23,423
    
    
    
    91,0612006 (Restated):Total assets
    
    $
    873,789
    
    
    $
    956,105
    
    
    $
    542,004
    
    
    $
    172,870
    
    
    $
    248,248
    
    
    $
    207,346
    
    
    $
    3,000,362Intersegment sales
    
    
    5,753
    
    
    
    18,147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,900
    )
    
    
    Depreciation and amortization
    
    
    39,951
    
    
    
    30,725
    
    
    
    2,528
    
    
    
    6,114
    
    
    
    10,578
    
    
    
    7,182
    
    
    
    97,078Capital expenditures
    
    
    19,418
    
    
    
    33,594
    
    
    
    2,705
    
    
    
    
    
    
    
    11,019
    
    
    
    17,027
    
    
    
    83,763
 
 (1) Cost of sales includes the year-to-year
change in unrealized hedging losses (gains) of:2008
    
    $
    13,522
    
    
    $
    29,047
    
    
    $
    13,703
    
    
    $
    788
    
    
    $
    847
    
    
    $
    (5,657
    )
    
    $
    52,2502007
    
    
    (48
    )
    
    
    (5,905
    )
    
    
    (2,737
    )
    
    
    
    
    
    
    (475
    )
    
    
    (1,120
    )
    
    
    (10,285
    )2006
    
    
    (6,486
    )
    
    
    (2,257
    )
    
    
    (2,729
    )
    
    
    
    
    
    
    (118
    )
    
    
    1,234
    
    
    
    (10,356
    )
  -126-




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##### Table of Contents



23. Quarterly Financial Information (Unaudited)
 First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Full Year2008Net sales
    
    $
    3,256,999
    
    
    $
    3,327,865
    
    
    $
    2,783,930
    
    
    $
    2,670,465
    
    
    $
    12,039,259Gross profit
    
    
    250,707
    
    
    
    311,488
    
    
    
    236,600
    
    
    
    156,554
    
    
    
    955,349Net earnings
    
    
    61,283
    
    
    
    102,785
    
    
    
    28,562
    
    
    
    (33,010
    )
    
    
    159,620
 First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Full Year2007Net sales
    
    $
    2,182,283
    
    
    $
    2,022,016
    
    
    $
    2,134,573
    
    
    $
    2,586,023
    
    
    $
    8,924,895Gross profit
    
    
    217,550
    
    
    
    189,416
    
    
    
    160,344
    
    
    
    197,279
    
    
    
    764,589Net earnings
    
    
    52,631
    
    
    
    79,497
    
    
    
    3,089
    
    
    
    25,712
    
    
    
    160,929
 24. Related Party Transactions
   2008
    
    2007
    
    2006Sales
    
    $
    1,082,721
    
    
    $
    705,606
    
    
    $
    406,627Purchases
    
    
    141,830
    
    
    
    127,433
    
    
    
    92,372Services provided
    
    
    4,102
    
    
    
    3,055
    
    
    
    17,650
 2008
    
    2007Notes receivable
    
    $
    15,712
    
    
    $
    12,656Notes payable
    
    
    20,000
    
    
    
    Accounts receivable
    
    
    60,735
    
    
    
    51,013Accounts payable
    
    
    22,387
    
    
    
    23,707
 25. Allowance for Doubtful Accounts
  Balance atBeginning
    
    Charges to
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atDescription
    
    of Year
    
    Expense(b)
    
    Recoveries
    
    Charge-offs
    
    Other(a)
    
    End of YearYear ended December 31, 2008
    
    $
    14,125
    
    
    $
    6,850
    
    
    $
    956
    
    
    $
    (4,641
    )
    
    $
    2,577
    
    
    $
    19,867Year ended December 31, 2007
    
    
    10,090
    
    
    
    3,264
    
    
    
    2,036
    
    
    
    (2,717
    )
    
    
    1,452
    
    
    
    14,125Year ended December 31, 2006 (Restated)
    
    
    13,561
    
    
    
    1,706
    
    
    
    782
    
    
    
    (4,323
    )
    
    
    (1,636
    )
    
    
    10,090
 
 (a)
    
    Includes accounts acquisitions and the impact of consolidations.(b)
    
    Excludes the 2007 effect of the $19.6 million charge to bad debt expense for the Golden Oval note. -127-




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##### Table of Contents



26. Subsequent Event (unaudited)
  27. Consolidating Financial Information
        -128-




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
December 31, 2008
 LandOLakes, Inc.Parent
    
    
    Consolidated
    
    
    Non-GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,985
    
    
    $
    7,028
    
    
    $
    18,807
    
    
    $
    
    
    
    $
    30,820Receivables, net
    
    
    130,313
    
    
    
    580,897
    
    
    
    941,107
    
    
    
    (548,056
    )
    
    
    1,104,261Intercompany receivables
    
    
    238,447
    
    
    
    9,633
    
    
    
    1,240
    
    
    
    (249,320
    )
    
    
    Inventories
    
    
    377,150
    
    
    
    606,765
    
    
    
    100,063
    
    
    
    
    
    
    
    1,083,978Prepaid assets
    
    
    686,331
    
    
    
    410,295
    
    
    
    4,379
    
    
    
    
    
    
    
    1,101,005Other current assets
    
    
    105,190
    
    
    
    16,715
    
    
    
    1,599
    
    
    
    
    
    
    
    123,504Total current assets
    
    
    1,542,416
    
    
    
    1,631,333
    
    
    
    1,067,195
    
    
    
    (797,376
    )
    
    
    3,443,568Investments
    
    
    1,058,744
    
    
    
    57,027
    
    
    
    16,517
    
    
    
    (817,801
    )
    
    
    314,487Property, plant and equipment, net
    
    
    252,638
    
    
    
    294,212
    
    
    
    111,411
    
    
    
    
    
    
    
    658,261Goodwill, net
    
    
    191,936
    
    
    
    64,532
    
    
    
    20,708
    
    
    
    
    
    
    
    277,176Other intangibles, net
    
    
    2,113
    
    
    
    111,763
    
    
    
    7,106
    
    
    
    
    
    
    
    120,982Other assets
    
    
    71,684
    
    
    
    40,553
    
    
    
    58,485
    
    
    
    (3,884
    )
    
    
    166,838Total assets
    
    $
    3,119,531
    
    
    $
    2,199,420
    
    
    $
    1,281,422
    
    
    $
    (1,619,061
    )
    
    $
    4,981,312LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    19,998
    
    
    $
    2,244
    
    
    $
    912,595
    
    
    $
    (525,467
    )
    
    $
    409,370Current portion of long-term debt
    
    
    281
    
    
    
    50
    
    
    
    2,533
    
    
    
    
    
    
    
    2,864Accounts payable
    
    
    418,156
    
    
    
    739,547
    
    
    
    41,247
    
    
    
    (22,955
    )
    
    
    1,175,995Intercompany payables
    
    
    
    
    
    
    246,342
    
    
    
    2,978
    
    
    
    (249,320
    )
    
    
    Customer advances
    
    
    643,180
    
    
    
    401,417
    
    
    
    1,108
    
    
    
    
    
    
    
    1,045,705Accrued liabilities
    
    
    185,234
    
    
    
    198,440
    
    
    
    43,338
    
    
    
    (3,518
    )
    
    
    423,494Patronage refunds and other member
equities payable
    
    
    37,751
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,751Total current liabilities
    
    
    1,304,600
    
    
    
    1,588,040
    
    
    
    1,003,799
    
    
    
    (801,260
    )
    
    
    3,095,179Long-term debt
    
    
    512,785
    
    
    
    71
    
    
    
    19,099
    
    
    
    
    
    
    
    531,955Employee benefits and other liabilities
    
    
    325,294
    
    
    
    29,047
    
    
    
    4,063
    
    
    
    
    
    
    
    358,404Minority interests
    
    
    
    
    
    
    (11
    )
    
    
    18,933
    
    
    
    
    
    
    
    18,922Commitments and contingenciesEquities:Capital stock
    
    
    1,611
    
    
    
    (34
    )
    
    
    2,935
    
    
    
    (2,901
    )
    
    
    1,611Additional paid-in capital
    
    
    
    
    
    
    200,643
    
    
    
    73,885
    
    
    
    (274,528
    )
    
    
    Member equities
    
    
    947,141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    947,141Accumulated other comprehensive loss
    
    
    (150,277
    )
    
    
    (15
    )
    
    
    (31
    )
    
    
    46
    
    
    
    (150,277
    )Retained earnings
    
    
    178,377
    
    
    
    381,679
    
    
    
    158,739
    
    
    
    (540,418
    )
    
    
    178,377Total equities
    
    
    976,852
    
    
    
    582,273
    
    
    
    235,528
    
    
    
    (817,801
    )
    
    
    976,852Total liabilities and equities
    
    $
    3,119,531
    
    
    $
    2,199,420
    
    
    $
    1,281,422
    
    
    $
    (1,619,061
    )
    
    $
    4,981,312
 -129-




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2008
 LandOLakes,Inc. Parent
    
    
    Consolidated
    
    
    Non-GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    5,194,546
    
    
    $
    5,876,261
    
    
    $
    968,452
    
    
    $
    
    
    
    $
    12,039,259Cost of sales
    
    
    4,872,294
    
    
    
    5,378,719
    
    
    
    832,897
    
    
    
    
    
    
    
    11,083,910Gross profit
    
    
    322,252
    
    
    
    497,542
    
    
    
    135,555
    
    
    
    
    
    
    
    955,349Selling, general and administrative
    
    
    297,159
    
    
    
    381,217
    
    
    
    78,230
    
    
    
    
    
    
    
    756,606Restructuring and impairment charges
    
    
    179
    
    
    
    1,720
    
    
    
    994
    
    
    
    
    
    
    
    2,893Gain on insurance settlement
    
    
    
    
    
    
    (6,606
    )
    
    
    (4,032
    )
    
    
    
    
    
    
    (10,638
    )Earnings from operations
    
    
    24,914
    
    
    
    121,211
    
    
    
    60,363
    
    
    
    
    
    
    
    206,488Interest expense (income), net
    
    
    76,945
    
    
    
    1,231
    
    
    
    (14,944
    )
    
    
    
    
    
    
    63,232Other (income) expense, net
    
    
    (12,092
    )
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    (12,028
    )Equity in earnings of affiliated companies
    
    
    (210,066
    )
    
    
    (3,700
    )
    
    
    (19,464
    )
    
    
    198,258
    
    
    
    (34,972
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    (11
    )
    
    
    16,139
    
    
    
    
    
    
    
    16,128Earnings before income taxes
    
    
    170,127
    
    
    
    123,627
    
    
    
    78,632
    
    
    
    (198,258
    )
    
    
    174,128Income tax expense (benefit)
    
    
    10,507
    
    
    
    (206
    )
    
    
    4,207
    
    
    
    
    
    
    
    14,508Net earnings
    
    $
    159,620
    
    
    $
    123,833
    
    
    $
    74,425
    
    
    $
    (198,258
    )
    
    $
    159,620
 -130-




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2008
 LandOLakes,Inc. Parent
    
    
    Consolidated
    
    
    Non-GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net earnings
    
    $
    159,620
    
    
    $
    123,833
    
    
    $
    74,425
    
    
    $
    (198,258
    )
    
    $
    159,620Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:Depreciation and amortization
    
    
    38,024
    
    
    
    43,250
    
    
    
    10,535
    
    
    
    
    
    
    
    91,809Amortization of deferred financing costs
    
    
    2,293
    
    
    
    
    
    
    
    2,150
    
    
    
    
    
    
    
    4,443Gain on extinguishment of debt
    
    
    (379
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (379
    )Bad debt expense
    
    
    972
    
    
    
    3,321
    
    
    
    2,557
    
    
    
    
    
    
    
    6,850Proceeds from patronage revolvement received
    
    
    3,330
    
    
    
    4,160
    
    
    
    
    
    
    
    
    
    
    
    7,490Non-cash patronage income
    
    
    (722
    )
    
    
    (5,035
    )
    
    
    
    
    
    
    
    
    
    
    (5,757
    )Deferred income tax benefit
    
    
    (5,417
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,417
    )Increase in other assets
    
    
    (766
    )
    
    
    (30
    )
    
    
    (474
    )
    
    
    149
    
    
    
    (1,121
    )Increase (decrease) in other liabilities
    
    
    17,578
    
    
    
    284
    
    
    
    (11
    )
    
    
    
    
    
    
    17,851Restructuring and impairment charges
    
    
    179
    
    
    
    1,720
    
    
    
    994
    
    
    
    
    
    
    
    2,893(Gain) loss on sale of investments
    
    
    (7,521
    )
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    (7,458
    )Gain on foreign currency exchange contracts on
sale of investment
    
    
    (4,191
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,191
    )Gain on insurance settlement
    
    
    
    
    
    
    (6,606
    )
    
    
    (4,032
    )
    
    
    
    
    
    
    (10,638
    )Equity in earnings of affiliated companies
    
    
    (210,066
    )
    
    
    (3,700
    )
    
    
    (19,464
    )
    
    
    198,258
    
    
    
    (34,972
    )Dividends from investments in affiliated
companies
    
    
    23,857
    
    
    
    3,602
    
    
    
    17,683
    
    
    
    
    
    
    
    45,142Minority interests
    
    
    
    
    
    
    (11
    )
    
    
    16,139
    
    
    
    
    
    
    
    16,128Other
    
    
    (1,128
    )
    
    
    (493
    )
    
    
    125
    
    
    
    
    
    
    
    (1,496
    )Changes in current assets and liabilities, net
of acquisitions and divestitures:Receivables
    
    
    361,305
    
    
    
    (167,662
    )
    
    
    (66,829
    )
    
    
    (215,550
    )
    
    
    (88,736
    )Inventories
    
    
    13,527
    
    
    
    (79,751
    )
    
    
    (30,793
    )
    
    
    
    
    
    
    (97,017
    )Prepaids and other current assets
    
    
    (259,131
    )
    
    
    (12,861
    )
    
    
    2,917
    
    
    
    
    
    
    
    (269,075
    )Accounts payable
    
    
    (81,070
    )
    
    
    109,566
    
    
    
    1,513
    
    
    
    (10,838
    )
    
    
    19,171Customer advances
    
    
    129,111
    
    
    
    (9,453
    )
    
    
    (18,366
    )
    
    
    
    
    
    
    101,292Accrued liabilities
    
    
    10,776
    
    
    
    39,005
    
    
    
    8,458
    
    
    
    276
    
    
    
    58,515Net cash provided (used) by operating activities
    
    
    190,181
    
    
    
    43,202
    
    
    
    (2,473
    )
    
    
    (225,963
    )
    
    
    4,947Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (92,261
    )
    
    
    (55,177
    )
    
    
    (23,906
    )
    
    
    
    
    
    
    (171,344
    )Acquisitions, net of cash acquired
    
    
    (1,743
    )
    
    
    (1,096
    )
    
    
    (6,201
    )
    
    
    
    
    
    
    (9,040
    )Investments in affiliates
    
    
    (50,786
    )
    
    
    
    
    
    
    (350
    )
    
    
    
    
    
    
    (51,136
    )Distributions from investment is affiliated
companies
    
    
    
    
    
    
    1,678
    
    
    
    
    
    
    
    
    
    
    
    1,678Proceeds from sale of investments
    
    
    19,464
    
    
    
    1,749
    
    
    
    
    
    
    
    
    
    
    
    21,213Proceeds from foreign currency exchange contracts
on sale of investment
    
    
    3,850
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,850Proceeds from sale of property, plant and equipment
    
    
    4,017
    
    
    
    1,963
    
    
    
    235
    
    
    
    
    
    
    
    6,215Insurance proceeds for replacement assets
    
    
    332
    
    
    
    
    
    
    
    4,571
    
    
    
    
    
    
    
    4,903Change in notes receivable
    
    
    1,483
    
    
    
    (339
    )
    
    
    (12,740
    )
    
    
    
    
    
    
    (11,596
    )Other
    
    
    (166
    )
    
    
    
    
    
    
    3,216
    
    
    
    
    
    
    
    3,050Net cash used by investing activities
    
    
    (115,810
    )
    
    
    (51,222
    )
    
    
    (35,175
    )
    
    
    
    
    
    
    (202,207
    )Cash flows from financing activities:Increase (decrease) in short-term debt
    
    
    9,627
    
    
    
    (1,571
    )
    
    
    32,810
    
    
    
    225,963
    
    
    
    266,829Proceeds from issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    496
    
    
    
    
    
    
    
    496Principal payments on long-term debt and capital
lease obligations
    
    
    (43,772
    )
    
    
    (429
    )
    
    
    (14,143
    )
    
    
    
    
    
    
    (58,344
    )Payments for redemption of member equities
    
    
    (97,590
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (97,590
    )Distributions to members
    
    
    50,100
    
    
    
    
    
    
    
    (50,100
    )
    
    
    
    
    
    
    Other
    
    
    (162
    )
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    (150
    )Net cash (used) provided by financing activities
    
    
    (81,797
    )
    
    
    (1,988
    )
    
    
    (30,937
    )
    
    
    225,963
    
    
    
    111,241Net decrease in cash
    
    
    (7,426
    )
    
    
    (10,008
    )
    
    
    (68,585
    )
    
    
    
    
    
    
    (86,019
    )Cash and cash equivalents at beginning of year
    
    
    12,411
    
    
    
    17,036
    
    
    
    87,392
    
    
    
    
    
    
    
    116,839Cash and cash equivalents at end of year
    
    $
    4,985
    
    
    $
    7,028
    
    
    $
    18,807
    
    
    $
    
    
    
    $
    30,820
 -131-




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
December 31, 2007
 LandOLakes, Inc.Parent
    
    
    Consolidated
    
    
    Non-GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,411
    
    
    $
    17,036
    
    
    $
    87,392
    
    
    $
    
    
    
    $
    116,839Receivables, net
    
    
    352,797
    
    
    
    544,941
    
    
    
    872,799
    
    
    
    (763,606
    )
    
    
    1,006,931Intercompany receivables
    
    
    
    
    
    
    146,951
    
    
    
    
    
    
    
    (146,951
    )
    
    
    Inventories
    
    
    390,236
    
    
    
    527,014
    
    
    
    47,265
    
    
    
    
    
    
    
    964,515Prepaid assets
    
    
    454,073
    
    
    
    398,820
    
    
    
    4,364
    
    
    
    
    
    
    
    857,257Other current assets
    
    
    55,781
    
    
    
    19,637
    
    
    
    939
    
    
    
    
    
    
    
    76,357Total current assets
    
    
    1,265,298
    
    
    
    1,654,399
    
    
    
    1,012,759
    
    
    
    (910,557
    )
    
    
    3,021,899Investments
    
    
    1,339,386
    
    
    
    48,312
    
    
    
    15,528
    
    
    
    (1,099,213
    )
    
    
    304,013Property, plant and equipment, net
    
    
    197,177
    
    
    
    270,044
    
    
    
    98,072
    
    
    
    
    
    
    
    565,293Goodwill, net
    
    
    211,900
    
    
    
    47,632
    
    
    
    21,410
    
    
    
    
    
    
    
    280,942Other intangibles, net
    
    
    3,587
    
    
    
    113,440
    
    
    
    7,977
    
    
    
    
    
    
    
    125,004Other assets
    
    
    35,887
    
    
    
    35,927
    
    
    
    53,965
    
    
    
    (3,735
    )
    
    
    122,044Total assets
    
    $
    3,053,235
    
    
    $
    2,169,754
    
    
    $
    1,209,711
    
    
    $
    (2,013,505
    )
    
    $
    4,419,195LIABILITIES AND EQUITIESCurrent liabilities:Notes and short-term obligations
    
    $
    
    
    
    $
    3,815
    
    
    $
    879,785
    
    
    $
    (751,430
    )
    
    $
    132,170Current portion of long-term debt
    
    
    
    
    
    
    396
    
    
    
    2,907
    
    
    
    (221
    )
    
    
    3,082Accounts payable
    
    
    498,081
    
    
    
    629,981
    
    
    
    34,408
    
    
    
    (12,117
    )
    
    
    1,150,353Intercompany payables
    
    
    90,209
    
    
    
    55,855
    
    
    
    887
    
    
    
    (146,951
    )
    
    
    Customer advances
    
    
    514,069
    
    
    
    410,870
    
    
    
    1,301
    
    
    
    
    
    
    
    926,240Accrued liabilities
    
    
    159,693
    
    
    
    152,233
    
    
    
    33,289
    
    
    
    (3,794
    )
    
    
    341,421Patronage refunds and other member
equities payable
    
    
    28,065
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,065Total current liabilities
    
    
    1,290,117
    
    
    
    1,253,150
    
    
    
    952,577
    
    
    
    (914,513
    )
    
    
    2,581,331Long-term debt
    
    
    556,844
    
    
    
    142
    
    
    
    29,702
    
    
    
    221
    
    
    
    586,909Employee benefits and other liabilities
    
    
    191,938
    
    
    
    25,002
    
    
    
    13,504
    
    
    
    
    
    
    
    230,444Minority interests
    
    
    
    
    
    
    1,558
    
    
    
    4,617
    
    
    
    
    
    
    
    6,175Commitments and contingenciesEquities:Capital stock
    
    
    1,701
    
    
    
    
    
    
    
    2,909
    
    
    
    (2,909
    )
    
    
    1,701Additional paid-in capital
    
    
    
    
    
    
    639,343
    
    
    
    125,260
    
    
    
    (764,603
    )
    
    
    Member equities
    
    
    937,126
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    937,126Accumulated other comprehensive
(loss) earnings
    
    
    (61,931
    )
    
    
    (189
    )
    
    
    476
    
    
    
    (287
    )
    
    
    (61,931
    )Retained earnings
    
    
    137,440
    
    
    
    250,748
    
    
    
    80,666
    
    
    
    (331,414
    )
    
    
    137,440Total equities
    
    
    1,014,336
    
    
    
    889,902
    
    
    
    209,311
    
    
    
    (1,099,213
    )
    
    
    1,014,336Total liabilities and equities
    
    $
    3,053,235
    
    
    $
    2,169,754
    
    
    $
    1,209,711
    
    
    $
    (2,013,505
    )
    
    $
    4,419,195
 -132-




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2007
 LandOLakes,Inc. Parent
    
    
    Consolidated
    
    
    Non-GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    4,804,249
    
    
    $
    3,507,453
    
    
    $
    613,193
    
    
    $
    
    
    
    $
    8,924,895Cost of sales
    
    
    4,440,745
    
    
    
    3,190,183
    
    
    
    529,378
    
    
    
    
    
    
    
    8,160,306Gross profit
    
    
    363,504
    
    
    
    317,270
    
    
    
    83,815
    
    
    
    
    
    
    
    764,589Selling, general and administrative
    
    
    302,539
    
    
    
    288,266
    
    
    
    32,721
    
    
    
    
    
    
    
    623,526Restructuring and impairment charges
    
    
    2,677
    
    
    
    595
    
    
    
    698
    
    
    
    
    
    
    
    3,970Gain on insurance settlement
    
    
    
    
    
    
    (5,941
    )
    
    
    
    
    
    
    
    
    
    
    (5,941
    )Earnings from operations
    
    
    58,288
    
    
    
    34,350
    
    
    
    50,396
    
    
    
    
    
    
    
    143,034Interest expense (income), net
    
    
    54,844
    
    
    
    1,592
    
    
    
    (6,791
    )
    
    
    
    
    
    
    49,645Other income, net
    
    
    (8,611
    )
    
    
    (28,474
    )
    
    
    (72
    )
    
    
    
    
    
    
    (37,157
    )Equity in earnings of affiliated companies
    
    
    (180,939
    )
    
    
    (2,399
    )
    
    
    (17,283
    )
    
    
    132,438
    
    
    
    (68,183
    )Minority interest in earnings of subsidiaries
    
    
    
    
    
    
    
    
    
    
    1,469
    
    
    
    
    
    
    
    1,469Earnings before income taxes
    
    
    192,994
    
    
    
    63,631
    
    
    
    73,073
    
    
    
    (132,438
    )
    
    
    197,260Income tax expense
    
    
    32,065
    
    
    
    502
    
    
    
    3,764
    
    
    
    
    
    
    
    36,331Net earnings
    
    $
    160,929
    
    
    $
    63,129
    
    
    $
    69,309
    
    
    $
    (132,438
    )
    
    $
    160,929
 -133-




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2007
 LandOLakes,Inc. Parent
    
    
    Consolidated
    
    
    Non-GuarantorCompany
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net earnings
    
    $
    160,929
    
    
    $
    63,129
    
    
    $
    69,309
    
    
    $
    (132,438
    )
    
    $
    160,929Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:Depreciation and amortization
    
    
    41,708
    
    
    
    33,490
    
    
    
    10,362
    
    
    
    
    
    
    
    85,560Amortization of deferred financing costs
    
    
    1,819
    
    
    
    288
    
    
    
    874
    
    
    
    
    
    
    
    2,981Bad debt expense
    
    
    20,834
    
    
    
    1,736
    
    
    
    248
    
    
    
    
    
    
    
    22,818Proceeds from patronage revolvement received
    
    
    6,701
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    6,706Non-cash patronage income
    
    
    (2,410
    )
    
    
    (133
    )
    
    
    
    
    
    
    
    
    
    
    (2,543
    )Insurance recovery  business interruption
    
    
    
    
    
    
    4,551
    
    
    
    
    
    
    
    
    
    
    
    4,551Deferred income tax benefit
    
    
    (8,047
    )
    
    
    (22,870
    )
    
    
    (514
    )
    
    
    
    
    
    
    (31,431
    )Increase in other assets
    
    
    (754
    )
    
    
    (2,064
    )
    
    
    (948
    )
    
    
    
    
    
    
    (3,766
    )Increase (decrease) in other liabilities
    
    
    3,617
    
    
    
    545
    
    
    
    (6
    )
    
    
    
    
    
    
    4,156Restructuring and impairment charges
    
    
    2,677
    
    
    
    595
    
    
    
    698
    
    
    
    
    
    
    
    3,970Gain on divestiture of business
    
    
    
    
    
    
    (28,474
    )
    
    
    
    
    
    
    
    
    
    
    (28,474
    )Gain on sale of investments
    
    
    (8,611
    )
    
    
    
    
    
    
    (72
    )
    
    
    
    
    
    
    (8,683
    )Gain on insurance settlement
    
    
    
    
    
    
    (5,941
    )
    
    
    
    
    
    
    
    
    
    
    (5,941
    )Equity in earnings of affiliated companies
    
    
    (180,939
    )
    
    
    (2,399
    )
    
    
    (17,283
    )
    
    
    132,438
    
    
    
    (68,183
    )Dividends from investments in affiliated
companies
    
    
    20,643
    
    
    
    2,461
    
    
    
    10,595
    
    
    
    
    
    
    
    33,699Minority interests
    
    
    
    
    
    
    
    
    
    
    1,469
    
    
    
    
    
    
    
    1,469Other
    
    
    (1,939
    )
    
    
    (275
    )
    
    
    (1,424
    )
    
    
    
    
    
    
    (3,638
    )Changes in current assets and liabilities, net
of acquisitions and divestitures:Receivables
    
    
    (52,740
    )
    
    
    (187,257
    )
    
    
    (404,977
    )
    
    
    350,961
    
    
    
    (294,013
    )Inventories
    
    
    (9,488
    )
    
    
    (188,315
    )
    
    
    (9,147
    )
    
    
    
    
    
    
    (206,950
    )Prepaids and other current assets
    
    
    (130,594
    )
    
    
    (384,149
    )
    
    
    3,064
    
    
    
    
    
    
    
    (511,679
    )Accounts payable
    
    
    115,127
    
    
    
    479,888
    
    
    
    6,662
    
    
    
    (14,965
    )
    
    
    586,712Customer advances
    
    
    130,012
    
    
    
    379,008
    
    
    
    (2,296
    )
    
    
    
    
    
    
    506,724Accrued liabilities
    
    
    (19,686
    )
    
    
    88,088
    
    
    
    8,743
    
    
    
    (1,160
    )
    
    
    75,985Net cash provided (used) by operating activities
    
    
    88,859
    
    
    
    231,907
    
    
    
    (324,643
    )
    
    
    334,836
    
    
    
    330,959Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (41,948
    )
    
    
    (43,641
    )
    
    
    (5,472
    )
    
    
    
    
    
    
    (91,061
    )Acquisitions, net of cash acquired
    
    
    (58
    )
    
    
    
    
    
    
    (2,872
    )
    
    
    
    
    
    
    (2,930
    )Investments in affiliates
    
    
    (331,399
    )
    
    
    
    
    
    
    (275
    )
    
    
    
    
    
    
    (331,674
    )Distributions from investment is affiliated
companies
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000Net settlement on repositioning investment in
joint venture
    
    
    77,550
    
    
    
    (165,425
    )
    
    
    
    
    
    
    
    
    
    
    (87,875
    )Net proceeds from divestitures of businesses
    
    
    211,851
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    212,101Proceeds from sale of investments
    
    
    475
    
    
    
    
    
    
    
    151
    
    
    
    
    
    
    
    626Proceeds from sale of property, plant and equipment
    
    
    3,568
    
    
    
    3,526
    
    
    
    3,408
    
    
    
    
    
    
    
    10,502Insurance proceeds for replacement assets
    
    
    
    
    
    
    8,635
    
    
    
    
    
    
    
    
    
    
    
    8,635Change in notes receivable
    
    
    (92
    )
    
    
    26
    
    
    
    (18,588
    )
    
    
    248
    
    
    
    (18,406
    )Other
    
    
    209
    
    
    
    (227
    )
    
    
    (184
    )
    
    
    
    
    
    
    (202
    )Net cash used by investing activities
    
    
    (54,844
    )
    
    
    (197,106
    )
    
    
    (23,582
    )
    
    
    248
    
    
    
    (275,284
    )Cash flows from financing activities:(Decrease) increase in short-term debt
    
    
    (476
    )
    
    
    509
    
    
    
    410,450
    
    
    
    (335,084
    )
    
    
    75,399Proceeds from issuance of long-term debt
    
    
    210
    
    
    
    1,830
    
    
    
    3,750
    
    
    
    
    
    
    
    5,790Principal payments on long-term debt and capital
lease obligations
    
    
    (8,824
    )
    
    
    (12,607
    )
    
    
    (20,001
    )
    
    
    
    
    
    
    (41,432
    )Payments for redemption of member equities
    
    
    (58,049
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58,049
    )Distributions to members
    
    
    36,811
    
    
    
    (23,111
    )
    
    
    (13,700
    )
    
    
    
    
    
    
    Other
    
    
    (252
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    (251
    )Net cash (used) provided by financing activities
    
    
    (30,580
    )
    
    
    (33,378
    )
    
    
    380,499
    
    
    
    (335,084
    )
    
    
    (18,543
    )Net increase in cash
    
    
    3,435
    
    
    
    1,423
    
    
    
    32,274
    
    
    
    
    
    
    
    37,132Cash and cash equivalents at beginning of year
    
    
    8,976
    
    
    
    15,613
    
    
    
    55,118
    
    
    
    
    
    
    
    79,707Cash and cash equivalents at end of year
    
    $
    12,411
    
    
    $
    17,036
    
    
    $
    87,392
    
    
    $
    
    
    
    $
    116,839
 -134-




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2006
 (Restated)LandOLakes,
    
    
    
    
    
    
    (Restated)Inc. Parent
    
    
    Consolidated
    
    
    Non-Guarantor
    
    
    
    
    
    
    (Restated)Company
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    3,269,031
    
    
    $
    3,336,244
    
    
    $
    497,014
    
    
    $
    
    
    
    $
    7,102,289Cost of sales
    
    
    2,958,004
    
    
    
    3,015,590
    
    
    
    469,917
    
    
    
    
    
    
    
    6,443,511Gross profit
    
    
    311,027
    
    
    
    320,654
    
    
    
    27,097
    
    
    
    
    
    
    
    658,778Selling, general and administrative
    
    
    227,057
    
    
    
    254,241
    
    
    
    35,206
    
    
    
    
    
    
    
    516,504Restructuring and impairment charges
    
    
    4,291
    
    
    
    64
    
    
    
    36,158
    
    
    
    
    
    
    
    40,513Earnings (loss) from operations
    
    
    79,679
    
    
    
    66,349
    
    
    
    (44,267
    )
    
    
    
    
    
    
    101,761Interest expense (income), net
    
    
    46,140
    
    
    
    13,391
    
    
    
    (473
    )
    
    
    
    
    
    
    59,058Other income, net
    
    
    (9,661
    )
    
    
    (1,097
    )
    
    
    (6,631
    )
    
    
    
    
    
    
    (17,389
    )Equity in (earnings) loss of affiliated companies
    
    
    (30,368
    )
    
    
    (1,477
    )
    
    
    3,348
    
    
    
    14,823
    
    
    
    (13,674
    )Minority interest in (loss) earnings of subsidiaries
    
    
    (62
    )
    
    
    
    
    
    
    1,511
    
    
    
    
    
    
    
    1,449Earnings (loss) before income taxes
    
    
    73,630
    
    
    
    55,532
    
    
    
    (42,022
    )
    
    
    (14,823
    )
    
    
    72,317Income tax expense (benefit)
    
    
    4,257
    
    
    
    1,562
    
    
    
    (2,875
    )
    
    
    
    
    
    
    2,944Net earnings (loss)
    
    $
    69,373
    
    
    $
    53,970
    
    
    $
    (39,147
    )
    
    $
    (14,823
    )
    
    $
    69,373
 -135-




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##### Table of Contents



LAND OLAKES, INC.
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2006
 (Restated)LandOLakes,
    
    
    
    
    
    
    (Restated)Inc. Parent
    
    
    Consolidated
    
    
    Non-Guarantor
    
    
    
    
    
    
    (Restated)Company
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net earnings (loss)
    
    $
    69,373
    
    
    $
    53,970
    
    
    $
    (39,147
    )
    
    $
    (14,823
    )
    
    $
    69,373Adjustments to reconcile net earnings to net cash provided
(used) by operating activities:Depreciation and amortization
    
    
    40,196
    
    
    
    44,897
    
    
    
    11,985
    
    
    
    
    
    
    
    97,078Amortization of deferred financing costs
    
    
    2,109
    
    
    
    79
    
    
    
    736
    
    
    
    
    
    
    
    2,924Bad debt (recovery) expense
    
    
    (588
    )
    
    
    2,025
    
    
    
    269
    
    
    
    
    
    
    
    1,706Proceeds from patronage revolvement received
    
    
    8,882
    
    
    
    281
    
    
    
    
    
    
    
    
    
    
    
    9,163Non-cash patronage income
    
    
    (1,765
    )
    
    
    (62
    )
    
    
    
    
    
    
    
    
    
    
    (1,827
    )Deferred income tax expense (benefit)
    
    
    13,260
    
    
    
    
    
    
    
    (4,722
    )
    
    
    
    
    
    
    8,538Decrease (increase) in other assets
    
    
    4,984
    
    
    
    (2,044
    )
    
    
    (47
    )
    
    
    
    
    
    
    2,893Increase (decrease) in other liabilities
    
    
    5,345
    
    
    
    (64
    )
    
    
    (13
    )
    
    
    
    
    
    
    5,268Restructuring and impairment charges
    
    
    4,291
    
    
    
    64
    
    
    
    36,158
    
    
    
    
    
    
    
    40,513Gain on divestiture of businesses
    
    
    
    
    
    
    (954
    )
    
    
    (6,631
    )
    
    
    
    
    
    
    (7,585
    )(Gain) loss on sale of investments
    
    
    (8,078
    )
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    (7,980
    )Equity in (earnings) loss of affiliated companies
    
    
    (30,368
    )
    
    
    (1,477
    )
    
    
    3,348
    
    
    
    14,823
    
    
    
    (13,674
    )Dividends from investments in affiliated companies
    
    
    2,034
    
    
    
    1,202
    
    
    
    1,500
    
    
    
    
    
    
    
    4,736Minority interests
    
    
    (62
    )
    
    
    
    
    
    
    1,511
    
    
    
    
    
    
    
    1,449Other
    
    
    (2,011
    )
    
    
    (7
    )
    
    
    (1,993
    )
    
    
    
    
    
    
    (4,011
    )Changes in current assets and liabilities, net of acquisitions
and divestitures:Receivables
    
    
    (3,024
    )
    
    
    (78,658
    )
    
    
    (341,795
    )
    
    
    462,306
    
    
    
    38,829Inventories
    
    
    11,804
    
    
    
    (30,965
    )
    
    
    (426
    )
    
    
    
    
    
    
    (19,587
    )Prepaids and other current assets
    
    
    (54,440
    )
    
    
    (6,693
    )
    
    
    834
    
    
    
    
    
    
    
    (60,299
    )Accounts payable
    
    
    (95,710
    )
    
    
    55,603
    
    
    
    (17,834
    )
    
    
    6,317
    
    
    
    (51,624
    )Customer advances
    
    
    32,054
    
    
    
    (10,597
    )
    
    
    2,186
    
    
    
    
    
    
    
    23,643Accrued liabilities
    
    
    42,047
    
    
    
    14,207
    
    
    
    7,231
    
    
    
    (3,108
    )
    
    
    60,377Net cash provided (used) by operating activities
    
    
    40,333
    
    
    
    40,905
    
    
    
    (346,850
    )
    
    
    465,515
    
    
    
    199,903Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (36,123
    )
    
    
    (34,647
    )
    
    
    (12,993
    )
    
    
    
    
    
    
    (83,763
    )Acquisitions, net of cash acquired
    
    
    (84,187
    )
    
    
    (3,873
    )
    
    
    
    
    
    
    
    
    
    
    (88,060
    )Investment in affiliates
    
    
    (22,925
    )
    
    
    
    
    
    
    (4,025
    )
    
    
    22,000
    
    
    
    (4,950
    )Net proceeds from divestitures of businesses
    
    
    
    
    
    
    5,407
    
    
    
    37,059
    
    
    
    
    
    
    
    42,466Proceeds from sale of investments
    
    
    8,372
    
    
    
    902
    
    
    
    
    
    
    
    
    
    
    
    9,274Proceeds from sale of property, plant and equipment
    
    
    358
    
    
    
    1,193
    
    
    
    203
    
    
    
    
    
    
    
    1,754Change in notes receivable
    
    
    21,802
    
    
    
    885
    
    
    
    (2,149
    )
    
    
    (4,757
    )
    
    
    15,781Other
    
    
    1,184
    
    
    
    3,901
    
    
    
    2,098
    
    
    
    
    
    
    
    7,183Net cash (used) provided by investing activities
    
    
    (111,519
    )
    
    
    (26,232
    )
    
    
    20,193
    
    
    
    17,243
    
    
    
    (100,315
    )Cash flows from financing activities:Increase (decrease) in short-term debt
    
    
    329
    
    
    
    1,037
    
    
    
    359,851
    
    
    
    (460,758
    )
    
    
    (99,541
    )Proceeds from issuance of long-term debt
    
    
    (400
    )
    
    
    710
    
    
    
    13,400
    
    
    
    
    
    
    
    13,710Principal payments on long-term debt and capital lease obligations
    
    
    (591
    )
    
    
    (807
    )
    
    
    (34,783
    )
    
    
    
    
    
    
    (36,181
    )Payments for debt issuance costs
    
    
    (1,536
    )
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (1,543
    )Distribution to members
    
    
    6,500
    
    
    
    
    
    
    
    (6,500
    )
    
    
    
    
    
    
    Payments for redemption of member equities
    
    
    (80,614
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80,614
    )Other
    
    
    (622
    )
    
    
    
    
    
    
    27,555
    
    
    
    (22,000
    )
    
    
    4,933Net cash (used) provided by financing activities
    
    
    (76,934
    )
    
    
    940
    
    
    
    359,516
    
    
    
    (482,758
    )
    
    
    (199,236
    )Net cash used by operating activities of discontinued operations
    
    
    (349
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (349
    )Net (decrease) increase in cash
    
    
    (148,469
    )
    
    
    15,613
    
    
    
    32,859
    
    
    
    
    
    
    
    (99,997
    )Cash and cash equivalents at beginning of year
    
    
    157,445
    
    
    
    
    
    
    
    22,259
    
    
    
    
    
    
    
    179,704Cash and cash equivalents at end of year
    
    $
    8,976
    
    
    $
    15,613
    
    
    $
    55,118
    
    
    $
    
    
    
    $
    79,707
 -136-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)
    
    
    (Unaudited)November 30,
    
    
    August 31,2008
    
    
    2008($ in thousands)ASSETSCurrent assets:Cash
    
    $
    17,925
    
    
    $
    34,536Trade receivables, net of allowance for doubtful
accounts of $1,016 and $1,194, respectively
    
    
    524
    
    
    
    2,481Rebates receivable
    
    
    
    
    
    
    1,601Other receivables
    
    
    432
    
    
    
    574Receivable from Land OLakes, Inc
    
    
    20,337
    
    
    
    662Receivable from CHS, Inc
    
    
    257
    
    
    
    185Receivable from Joint Venture
    
    
    
    
    
    
    3,780Inventories
    
    
    2,687
    
    
    
    1,774Prepaid expenses
    
    
    20
    
    
    
    20Assets held for sale
    
    
    410,629
    
    
    
    433,525Total current assets
    
    
    452,811
    
    
    
    479,138Property, plant and equipment:Land and land improvements
    
    
    241
    
    
    
    241Buildings
    
    
    2,373
    
    
    
    2,504Machinery and equipment
    
    
    39,566
    
    
    
    40,198Construction in progress
    
    
    4
    
    
    
    Total property, plant and equipment
    
    
    42,184
    
    
    
    42,943Less accumulated depreciation
    
    
    (33,954
    )
    
    
    (32,259
    )Net property, plant and equipment
    
    
    8,230
    
    
    
    10,684Other assets
    
    
    15,268
    
    
    
    11,874Total assets
    
    $
    476,309
    
    
    $
    501,696LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Cash overdraft
    
    $
    5,303
    
    
    $
    4,365Accounts payable
    
    
    444
    
    
    
    13,749Customer prepayments
    
    
    33
    
    
    
    631Accrued expenses
    
    
    26,783
    
    
    
    33,306Other current liabilities
    
    
    1,156
    
    
    
    1,280Liabilities held for sale
    
    
    72,194
    
    
    
    71,014Total current liabilities
    
    
    105,913
    
    
    
    124,345Other noncurrent liabilities
    
    
    11,945
    
    
    
    12,221Members equity:Contributed capital
    
    
    271,858
    
    
    
    271,858Retained earnings
    
    
    85,835
    
    
    
    92,514Accumulated other comprehensive loss
    
    
    758
    
    
    
    758Total members equity
    
    
    358,451
    
    
    
    365,130Total liabilities and members equity
    
    $
    476,309
    
    
    $
    501,696
  -137-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months EndedNovember 30,2008
    
    
    2007($ in thousands)(Unaudited)Net sales
    
    $
    96,378
    
    
    $
    210,590Cost of sales
    
    
    77,009
    
    
    
    141,856Gross margin
    
    
    19,369
    
    
    
    68,734Selling, general, and administrative expense
    
    
    27,725
    
    
    
    47,616Restructuring and impairment charges
    
    
    460
    
    
    
    5,559Gain on sale of assets
    
    
    (1,224
    )
    
    
    (1,683
    )Loss (earnings) from operations
    
    
    (7,592
    )
    
    
    17,242Other expense
    
    
    
    
    
    
    2,669Interest expense, net
    
    
    (924
    )
    
    
    2,496Minority Interests
    
    
    11
    
    
    
    1,872Net (loss) earnings
    
    $
    (6,679
    )
    
    $
    10,205
  -138-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedNovember 30,2008
    
    
    2007($ in thousands)(Unaudited)Cash flows from operating activities:Net (loss) earnings
    
    $
    (6,679
    )
    
    $
    10,205Adjustments to reconcile net (loss) earnings to
net cash used by operating activities:Depreciation and amortization
    
    
    3,827
    
    
    
    4,246Restructuring and impairment charges
    
    
    460
    
    
    
    5,559Bad debt expense
    
    
    274
    
    
    
    600Loss on extinguishment of debt
    
    
    
    
    
    
    2,669Gain on sale of assets
    
    
    (610
    )
    
    
    (440
    )Minority interests
    
    
    11
    
    
    
    1,872Changes in other non-current assets and liabilities
    
    
    (3,678
    )
    
    
    446Changes in current assets and liabilities:Trade receivables
    
    
    1,683
    
    
    
    18,198Receivables/payables from related parties
    
    
    (15,951
    )
    
    
    (22,887
    )Rebates receivable
    
    
    1,601
    
    
    
    (40,637
    )Other receivables
    
    
    142
    
    
    
    3,929Inventories
    
    
    (913
    )
    
    
    (18,306
    )Vendor prepayments
    
    
    
    
    
    
    (18,861
    )Accounts payable and customer prepayments
    
    
    (13,903
    )
    
    
    (368,142
    )Accrued competitive allowances
    
    
    
    
    
    
    5,461Accrued expenses
    
    
    (7,695
    )
    
    
    (14,512
    )Assets held for sale
    
    
    22,896
    
    
    
    7,631Liabilities held for sale
    
    
    1,180
    
    
    
    (54,255
    )Other current assets and liabilities
    
    
    (141
    )
    
    
    1,875Net cash used by operating activities
    
    
    (17,496
    )
    
    
    (475,349
    )Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (887
    )
    
    
    (1,737
    )Proceeds from sale of property, plant and equipment
    
    
    834
    
    
    
    484Net cash used by investing activities
    
    
    (53
    )
    
    
    (1,253
    )Cash flows from financing activities:Change in short-term debt
    
    
    
    
    
    
    19,316Payments for debt extinguishment costs
    
    
    
    
    
    
    (2,669
    )Increase (decrease) in cash overdrafts
    
    
    938
    
    
    
    (11,367
    )Capital contributions by members
    
    
    
    
    
    
    463,899Net cash provided by financing activities
    
    
    938
    
    
    
    469,179Net change in cash
    
    
    (16,611
    )
    
    
    (7,423
    )Cash at beginning of period
    
    
    34,536
    
    
    
    7,423Cash at end of period
    
    $
    17,925
    
    
    $
    
  -139-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Summary of Significant Accounting Policies
  2. Repositioning of Businesses
  3. Borrowing Arrangements
   -140-




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AGRILIANCE LLC and subsidiaries
 CONSOLIDATED BALANCE SHEET
 August 31, 2008
 ($ in thousands)
 (Unaudited)2008ASSETSCurrent assets:Cash
    
    $
    34,536Trade receivables, net of allowance for doubtful accounts of $1,194 in 2008
    
    
    2,481Rebates receivable
    
    
    1,601Other receivables
    
    
    574Receivable from Land O Lakes, Inc
    
    
    662Receivable from CHS, Inc.
    
    
    185Receivable from Joint Venture
    
    
    3,780Inventories
    
    
    1,774Prepaid expenses
    
    
    20Assets held for sale
    
    
    433,525Total current assets
    
    
    479,138Property, plant and equipment:Land and land improvements
    
    
    241Buildings
    
    
    2,504Machinery and equipment
    
    
    40,198Total property, plant and equipment
    
    
    42,943Less accumulated depreciation
    
    
    (32,259
    )Net property, plant and equipment
    
    
    10,684Other assets
    
    
    11,874Total assets
    
    $
    501,696LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Cash overdraft
    
    $
    4,365Accounts payable
    
    
    13,749Customer prepayments
    
    
    631Accrued expenses
    
    
    33,306Other current liabilities
    
    
    1,280Liabilities held for sale
    
    
    71,014Total current liabilities
    
    
    124,345Other noncurrent liabilities
    
    
    12,221Members equity:Contributed capital
    
    
    271,858Retained earnings
    
    
    92,514Accumulated other comprehensive income
    
    
    758Total members equity
    
    
    365,130Total liabilities and members equity
    
    $
    501,696
  -141-




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AGRILIANCE LLC and subsidiaries
 CONSOLIDATED STATEMENT OF OPERATIONS
 Year ended August 31, 2008
 ($ in thousands)
 (Unaudited)2008Net sales
    
    $
    1,070,892Cost of sales
    
    
    825,605Gross margin
    
    
    245,287Selling, general and administrative expense
    
    
    161,959Restructuring and impairment charges
    
    
    11,738Gain on sale of assets
    
    
    (3,434
    )Earnings from operations
    
    
    75,024Other expense
    
    
    2,669Minority interests
    
    
    (590
    )Interest expense, net
    
    
    2,045Net earnings
    
    $
    70,900
  -142-




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AGRILIANCE LLC and subsidiaries
 CONSOLIDATED STATEMENT OF CASH FLOWS
 Year ended August 31, 2008
 ($ in thousands)
 (Unaudited)2008Cash flows from operating activities:Net earnings
    
    $
    70,900Adjustments to reconcile net earnings to net cash used in operating activities:Depreciation and amortization
    
    
    17,463Non-cash portion of restructuring and impairment charges
    
    
    11,738Loss on extinguishment of debt
    
    
    2,669Bad debt expense (benefit)
    
    
    4,327Minority interests
    
    
    (590
    )Gain on disposal of property, plant and equipment
    
    
    (3,434
    )Changes in other non-current assets and liabilities
    
    
    2,292Changes in current assets and liabilities:Trade receivables
    
    
    191,351Receivables/payables from related parties
    
    
    4,203Rebates receivable
    
    
    (35,266
    )Other receivables
    
    
    1,897Inventories
    
    
    (6,410
    )Vendor prepayments
    
    
    (19,775
    )Accounts payable and customer prepayments
    
    
    (506,706
    )Accrued expenses
    
    
    (17,823
    )Assets and liabilities held for sale
    
    
    (140,836
    )Other current assets and liabilities
    
    
    (1,150
    )Net cash used in operating activities
    
    
    (425,150
    )Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (4,554
    )Proceeds from sale of property, plant and equipment
    
    
    10,351Proceeds from minority interest partners
    
    
    (1,500
    )Net cash provided by investing activities
    
    
    4,297Cash flows from financing activities:Proceeds from issuance of short-term debt
    
    
    1,880Proceeds from issuance of long-term debt
    
    
    (6
    )Payments for debt extinguishment costs
    
    
    (2,669
    )Decrease in cash overdrafts
    
    
    (18,078
    )Distribution of earnings to members
    
    
    (40,000
    )Capital contribution by members
    
    
    510,000Assets and liabilities held for sale
    
    
    (3,161
    )Net cash provided by financing activities
    
    
    447,966Net change in cash
    
    
    27,113Cash at beginning of period
    
    
    7,423Cash at end of period
    
    $
    34,536
  -143-




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AGRILIANCE LLC and subsidiaries
 
 CONSOLIDATED STATEMENT OF MEMBERS EQUITY AND COMPREHENSIVE INCOME
 Year ended August 31, 2008
 ($ in thousands)
 Accumulatedother
    
    
    TotalContributed
    
    
    Retained
    
    
    comprehensive
    
    
    members
    
    
    Comprehensivecapital
    
    
    earnings
    
    

(loss)
income
    
    
    equity
    
    
    incomeBalance at August 31, 2007
    
    $
    159,089
    
    
    $
    61,614
    
    
    $
    (5,107
    )
    
    $
    215,596Net earnings
    
    
    
    
    
    
    70,900
    
    
    
    
    
    
    
    70,900
    
    
    $
    70,900Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    5,865
    
    
    
    5,865
    
    
    
    5,865Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    76,765Contributed Capital
    
    
    711,798
    
    
    
    
    
    
    
    
    
    
    
    711,798Distributions to members
    
    
    (599,029
    )
    
    
    
    
    
    
    
    
    
    
    (599,029
    )Distributions paid to members
    
    
    
    
    
    
    (40,000
    )
    
    
    
    
    
    
    (40,000
    )Balance at August 31, 2008 (Unaudited)
    
    $
    271,858
    
    
    $
    92,514
    
    
    $
    758
    
    
    $
    365,130
  -144-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (1) Organization and Summary of Significant Accounting Policies
 (a) Organization
  (b) Statement Presentation
  (c) Revenue Recognition
  (d) Income Taxes
  (e) Inventories
  (f) Rebates Receivable
 Accounting by a Customer (Including a Reseller) for
Certain Consideration Received from a Vendor,
 (g) Property, Plant, and Equipment
  -145-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 (h) Fair Value of Financial Instruments
 Disclosures about Fair Value of Financial Instruments,
 (j) Accounting Estimates
  (2) Short-term Debt
   (3) Long-term Debt
    -146-




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AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (4) Receivables Purchase Facility
  (5) Pension and Other Postretirement Plans
   Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
 (In Thousands)Before
    
    
    
    
    
    AfterApplication
    
    
    
    
    
    ApplicationOf Statement 158
    
    Adjustments
    
    Of Statement 158Other noncurrent assets
    
    $
    10,734
    
    
    $
    (5,492
    )
    
    $
    5,242Other noncurrent liabilities
    
    
    (8,555
    )
    
    
    1,332
    
    
    
    (7,223
    )Accumulated other comprehensive loss
    
    
    947
    
    
    
    4,160
    
    
    
    5,107
 -147-




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AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  (In Thousands)Pension
    
    
    PostretirementBenefits
    
    
    Benefits2008
    
    
    2008Benefit obligation
    
    $
    (103,622
    )
    
    $
    (4,923
    )Fair value of plan assets
    
    
    114,744
    
    
    
    Funded status
    
    $
    11,122
    
    
    $
    (4,923
    )Amounts recognized in the balance sheet consist of:Other noncurrent assets
    
    $
    11,122
    
    
    $
    Other noncurrent liabilities
    
    
    
    
    
    
    (4,711
    )Prepaid (accrued benefit)
    
    
    
    
    
    
    Amounts recognized in accumulated other comprehensive income
    
    $
    (646
    )
    
    $
    (989
    )
   Pension
    
    PostretirementBenefits
    
    Benefits2008
    
    2008Discount rate
    
    
    7.00
    %
    
    
    7.00
    %Rate of compensation increase
    
    
    3.00
    %
    
    
    N/A
  Pension
    
    PostretirementBenefits
    
    Benefits2008
    
    2008Discount rate
    
    
    6.25
    %
    
    
    6.25
    %Expected long-term rate of return on plan assets
    
    
    8.50
    %
    
    
    N/ARate of compensation increase
    
    
    2.50
    %
    
    
    N/A
   (In Thousands)Pension
    
    PostretirementBenefits
    
    Benefits2008
    
    2008Benefit cost
    
    $
    (75
    )
    
    $
    449Employer contribution
    
    
    
    
    
    
    492Plan participants contributions
    
    
    
    
    
    
    353Benefits paid
    
    
    3,405
    
    
    
    845
 -148-




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AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Plan Assets
  Plan Assets at August 31Asset category
    
    2008Equity securities
    
    
    54.1
    %Debt securities
    
    
    32.7
    %Real Estate
    
    
    12.6
    %Other
    
    
    0.6
    %Total
    
    
    100.0
    %
  Cash Flows
    Expected BenefitPayments($ in thousands)2009
    
    $
    3442010
    
    
    3382011
    
    
    3142012
    
    
    3172013
    
    
    3152014-2018
    
    
    1,597Total
    
    $
    3,225
 Other Plans
    -149-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (6) Related Party Transactions
   2008($ in thousands)Land OLakes, Inc.
    
    $
    9,880CHS Inc.
    
    
    633
  2008($ in thousands)Land OLakes, Inc.
    
    $
    84CHS Inc.
    
    
    5,837
  (7) Lease Commitments
   Year ending August 31,
    
    ($ in thousands)2009
    
    $
    7,2672010
    
    
    5,2672011
    
    
    2,6872012
    
    
    1,0032013
    
    
    4262014 and thereafter
    
    
    109
  (8) Contingencies
 (a) Environmental
  (b) Guarantees
  -150-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (c) General
  (9) Restructuring and Impairment Charges
 ($ in thousands)2008Restructuring charge
    
    $
    10,989Impairment charges
    
    
    749Total
    
    $
    11,738
     -151-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (10) Assets and Liabilities Held for Sale
  ($ in thousands)
2008Cash
    
    $
    Net trade receivables
    
    
    158,130Rebates receivables
    
    
    35,939Other receivables
    
    
    4,408Related Party Receivable
    
    
    7,509Inventories
    
    
    178,727Vendor prepayments
    
    
    30,359Prepaid expenses
    
    
    65Net property, plant and equipment
    
    
    17,800Other assets
    
    
    588Assets held for sale
    
    $
    433,525
  ($ in thousands)2008Cash overdraft
    
    $
    Accounts payable
    
    
    (49,285
    )Customer prepayments
    
    
    (2,360
    )Accrued expenses
    
    
    (17,434
    )Other current liabilities
    
    
    (1,735
    )Other non-current liabilities
    
    
    (200
    )Liabilities held for sale
    
    $
    (71,014
    )
 -152-




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Employers Accounting for Defined Benefit Pension and Other Postretirement Plans,
  /s/ KPMG LLP 
 -153-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
 
 CONSOLIDATED BALANCE SHEETS
 August 31, 2007 and 2006
 ($ in thousands)
 2007
    
    
    2006ASSETSCurrent assets:Cash
    
    $
    7,423
    
    
    $
    9,552Trade receivables, net of allowance
for doubtful accounts of $3,205 and
$14,664 in 2007 and 2006, respectively
    
    
    220,672
    
    
    
    294,213Rebates receivable
    
    
    62,901
    
    
    
    101,085Other receivables
    
    
    5,788
    
    
    
    8,782Receivable from Land O Lakes, Inc.
    
    
    2,521
    
    
    
    Inventories
    
    
    551,220
    
    
    
    659,335Vendor prepayments
    
    
    259,299
    
    
    
    103,664Prepaid expenses
    
    
    2,282
    
    
    
    9,360Assets held for sale
    
    
    341,521
    
    
    
    Total current assets
    
    
    1,453,627
    
    
    
    1,185,991Property, plant and equipment:Land and land improvements
    
    
    13,029
    
    
    
    18,971Buildings
    
    
    67,454
    
    
    
    71,692Machinery and equipment
    
    
    114,770
    
    
    
    162,624Construction in progress
    
    
    710
    
    
    
    22,622Total property, plant and equipment
    
    
    195,963
    
    
    
    275,909Less accumulated depreciation
    
    
    (98,265
    )
    
    
    (137,244
    )Net property, plant and equipment
    
    
    97,698
    
    
    
    138,665Other assets
    
    
    17,389
    
    
    
    27,700Total assets
    
    $
    1,568,714
    
    
    $
    1,352,356LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Cash overdraft
    
    $
    19,617
    
    
    $
    14,110Accounts payable
    
    
    603,418
    
    
    
    591,149Customer prepayments
    
    
    207,438
    
    
    
    135,226Accrued competitive allowances
    
    
    60,738
    
    
    
    55,432Accrued expenses
    
    
    51,630
    
    
    
    70,712Payable to Land OLakes, Inc.
    
    
    
    
    
    
    18,363Payable to CHS Inc.
    
    
    5,911
    
    
    
    4,169Other current liabilities
    
    
    3,302
    
    
    
    6,202Current portion of long-term debt
    
    
    755
    
    
    
    Short-term debt
    
    
    142,858
    
    
    
    107,875Liabilities held for sale
    
    
    123,007
    
    
    
    Total current liabilities
    
    
    1,218,674
    
    
    
    1,003,238Long-term debt, less current portion
    
    
    104,684
    
    
    
    104,621Other noncurrent liabilities
    
    
    14,306
    
    
    
    19,304Minority interest in subsidiaries
    
    
    15,454
    
    
    
    6,403Members equity:Contributed capital
    
    
    159,089
    
    
    
    159,089Retained earnings
    
    
    61,614
    
    
    
    60,763Accumulated other comprehensive loss
    
    
    (5,107
    )
    
    
    (1,062
    )Total members equity
    
    
    215,596
    
    
    
    218,790Total liabilities and members equity
    
    $
    1,568,714
    
    
    $
    1,352,356
  -154-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years ended August 31, 2007 and 2006
 ($ in thousands)
 2007
    
    
    2006Net sales
    
    $
    4,029,489
    
    
    $
    3,749,632Cost of sales
    
    
    3,617,912
    
    
    
    3,393,522Gross margin
    
    
    411,577
    
    
    
    356,110Selling, general and administrative expense
    
    
    314,073
    
    
    
    284,504Restructuring and impairment charges
    
    
    27,750
    
    
    
    Gain on sale of assets
    
    
    (2,699
    )
    
    
    (5,606
    )Earnings from operations
    
    
    72,453
    
    
    
    77,212Minority interests
    
    
    5,668
    
    
    
    2,718Interest expense, net
    
    
    26,734
    
    
    
    26,188Net earnings
    
    $
    40,051
    
    
    $
    48,306
  -155-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years ended August 31, 2007 and 2006
 ($ in thousands)
 2007
    
    
    2006Cash flows from operating activities:Net earnings
    
    $
    40,051
    
    
    $
    48,306Adjustments to reconcile net earnings to net cash (used
in) provided by operating activities:Depreciation and amortization
    
    
    29,476
    
    
    
    19,479Non-cash portion of restructuring and impairment charges
    
    
    26,950
    
    
    
    Bad debt expense (benefit)
    
    
    4,251
    
    
    
    (3,218
    )Minority interests
    
    
    5,668
    
    
    
    2,718Gain on disposal of property, plant and equipment
    
    
    (2,699
    )
    
    
    (5,606
    )Changes in other non-current assets and liabilities
    
    
    16,222
    
    
    
    673Changes in current assets and liabilities:Trade receivables
    
    
    69,290
    
    
    
    27,243Receivables/payables from related parties
    
    
    (18,972
    )
    
    
    23,522Rebates receivable
    
    
    38,184
    
    
    
    (39,037
    )Other receivables
    
    
    2,994
    
    
    
    (386
    )Inventories
    
    
    108,115
    
    
    
    (122
    )Vendor prepayments
    
    
    (155,635
    )
    
    
    67,455Accounts payable and customer prepayments
    
    
    84,481
    
    
    
    (163,917
    )Accrued competitive allowances
    
    
    5,306
    
    
    
    (6,708
    )Accrued expenses
    
    
    (26,032
    )
    
    
    (11,311
    )Assets and liabilities held for sale
    
    
    (221,675
    )
    
    
    Other current assets and liabilities
    
    
    4,009
    
    
    
    937Net cash (used in) provided by operating activities
    
    
    9,984
    
    
    
    (39,972
    )Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (26,549
    )
    
    
    (34,738
    )Proceeds from sale of property, plant and equipment
    
    
    5,784
    
    
    
    7,253Proceeds from minority interest partners
    
    
    3,383
    
    
    
    Net cash used in investing activities
    
    
    (17,382
    )
    
    
    (27,485
    )Cash flows from financing activities:Proceeds from issuance of short-term debt
    
    
    34,983
    
    
    
    84,225Proceeds from issuance of long-term debt
    
    
    818
    
    
    
    4,621Increase in cash overdrafts
    
    
    5,507
    
    
    
    11,818Distribution of earnings to members
    
    
    (39,200
    )
    
    
    (57,801
    )Assets and liabilities held for sale
    
    
    3,161
    
    
    
    Net cash provided by financing activities
    
    
    5,269
    
    
    
    42,863Net change in cash
    
    
    (2,129
    )
    
    
    (24,594
    )Cash at beginning of period
    
    
    9,552
    
    
    
    34,146Cash at end of period
    
    $
    7,423
    
    
    $
    9,552
  -156-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
 
 CONSOLIDATED STATEMENTS OF MEMBERS EQUITY AND COMPREHENSIVE INCOME
 Years ended August 31, 2007 and 2006
 ($ in thousands)
 Accumulatedother
    
    
    TotalContributed
    
    
    Retained
    
    
    comprehensive
    
    
    members
    
    
    Comprehensivecapital
    
    
    earnings
    
    
    (loss)
    
    
    equity
    
    
    incomeBalance at August 31, 2005
    
    $
    159,089
    
    
    $
    70,258
    
    
    $
    (1,423
    )
    
    $
    227,924Net earnings
    
    
    
    
    
    
    48,306
    
    
    
    
    
    
    
    48,306
    
    
    $
    48,306Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    361
    
    
    
    361
    
    
    
    361Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    48,667Distributions paid to members
    
    
    
    
    
    
    (57,801
    )
    
    
    
    
    
    
    (57,801
    )Balance at August 31, 2006
    
    
    159,089
    
    
    
    60,763
    
    
    
    (1,062
    )
    
    
    218,790Net earnings
    
    
    
    
    
    
    40,051
    
    
    
    
    
    
    
    40,051
    
    
    $
    40,051Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    115
    
    
    
    115
    
    
    
    115Adjustment to initially apply FAS 158
    
    
    
    
    
    
    
    
    
    
    (4,160
    )
    
    
    (4,160
    )
    
    
    Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    40,166Distributions paid to members
    
    
    
    
    
    
    (39,200
    )
    
    
    
    
    
    
    (39,200
    )Balance at August 31, 2007
    
    $
    159,089
    
    
    $
    61,614
    
    
    $
    (5,107
    )
    
    $
    215,596
  -157-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
 (1) Organization and Summary of Significant Accounting Policies
 (a) Organization
  (b) Statement Presentation
  (c) Revenue Recognition
  (d) Income Taxes
  (e) Inventories
  (f) Rebates Receivable
 Accounting by a Customer (Including a Reseller) for Certain Consideration Received
from a Vendor,
 (g) Property, Plant, and Equipment
  -158-




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AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
 (h) Derivative Commodity Instruments
 Accounting for Derivative
Instruments and Hedging Activities
 (i) Fair Value of Financial Instruments
 Disclosures about Fair Value of Financial Instruments,
 (j) Accounting Estimates
  (2) Short-term Debt
    (3) Long-term Debt
   -159-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
  Year ending August 31:
    
    (In thousands)2008
    
    $
    7552009
    
    
    48,7652010
    
    
    7752011
    
    
    52,7872012
    
    
    1,2362013 and thereafter
    
    
    1,121Total
    
    $
    105,439
     (4) Receivables Purchase Facility
  (5) Pension and Other Postretirement Plans
   Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
 -160-




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AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
  (In Thousands)Before
    
    
    
    
    
    AfterApplication Of
    
    
    
    
    
    Application OfStatement 158
    
    Adjustments
    
    Statement 158Other noncurrent assets
    
    $
    10,734
    
    
    $
    (5,492
    )
    
    $
    5,242Other noncurrent liabilities
    
    
    (8,555
    )
    
    
    1,332
    
    
    
    (7,223
    )Accumulated other comprehensive loss
    
    
    947
    
    
    
    4,160
    
    
    
    5,107
  (In Thousands)Pension Benefits
    
    
    Postretirement Benefits2007
    
    
    2006
    
    
    2007
    
    
    2006Benefit obligation
    
    $
    (112,905
    )
    
    $
    (107,418
    )
    
    $
    (4,600
    )
    
    $
    (4,974
    )Fair value of plan assets
    
    
    118,147
    
    
    
    104,467
    
    
    
    
    
    
    
    Funded status
    
    $
    5,242
    
    
    $
    (2,951
    )
    
    $
    (4,600
    )
    
    $
    (4,974
    )Amounts recognized in the balance sheet consist of:Other noncurrent assets
    
    $
    5,242
    
    
    
    N/A
    
    
    $
    
    
    
    
    N/AOther noncurrent liabilities
    
    
    
    
    
    
    N/A
    
    
    
    (4,513
    )
    
    
    N/APrepaid (accrued benefit)
    
    
    
    
    
    
    14,273
    
    
    
    
    
    
    
    (5,725
    )Amounts recognized in accumulated other
comprehensive income
    
    $
    5,158
    
    
    $
    
    
    
    $
    (1,354
    )
    
    $
    5,725
   Pension Benefits
    
    Postretirement Benefits2007
    
    2006
    
    2007
    
    2006Discount rate
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %Rate of compensation increase
    
    
    2.50
    %
    
    
    2.50
    %
    
    
    N/A
    
    
    
    N/A
  Pension Benefits
    
    Postretirement Benefits2007
    
    2006
    
    2007
    
    2006Discount rate
    
    
    6.25
    %
    
    
    5.50
    %
    
    
    6.25
    %
    
    
    5.50
    %Expected long-term rate of return on plan assets
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    N/A
    
    
    
    N/ARate of compensation increase
    
    
    2.50
    %
    
    
    2.50
    %
    
    
    N/A
    
    
    
    N/A
   -161-




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AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
 Year ended August 31,(In Thousands)Pension Benefits
    
    Postretirement Benefits2007
    
    2006
    
    2007
    
    2006Benefit cost
    
    $
    3,871
    
    
    $
    6,875
    
    
    $
    536
    
    
    $
    476Employer contribution
    
    
    
    
    
    
    
    
    
    
    406
    
    
    
    406Plan participants contributions
    
    
    
    
    
    
    
    
    
    
    343
    
    
    
    217Benefits paid
    
    
    2,685
    
    
    
    2,820
    
    
    
    750
    
    
    
    623
 Plan Assets
  Plan Assets at August 31Asset category
    
    2007
    
    
    2006Equity securities
    
    
    57.3
    %
    
    
    57.9
    %Debt securities
    
    
    31.0
    %
    
    
    30.7
    %Real Estate
    
    
    11.1
    %
    
    
    10.7
    %Other
    
    
    0.6
    %
    
    
    0.7
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  Cash Flows
    Expected Benefit
    
    
    Expected MedicarePayments
    
    
    Subsidy Receipts($ in thousands)
    
    
    ($ in thousands)2008
    
    $
    369
    
    
    $
    (18
    )2009
    
    
    364
    
    
    
    (19
    )2010
    
    
    359
    
    
    
    (21
    )2011
    
    
    335
    
    
    
    (23
    )2012
    
    
    340
    
    
    
    (24
    )2013-2017
    
    
    1,710
    
    
    
    (147
    )Total
    
    $
    3,477
    
    
    $
    (252
    )
 -162-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
 Other Plans
    (6) Related Party Transactions
  Year Ended August 31,2007
    
    2006($ in thousands)Land OLakes, Inc.
    
    $
    11,813
    
    
    $
    12,459CHS Inc.
    
    
    6,443
    
    
    
    5,640
  Year Ended August 31,2007
    
    2006($ in thousands)Land OLakes, Inc.
    
    $
    12,008
    
    
    $
    10,666CHS Inc.
    
    
    217,741
    
    
    
    219,634
  (7) Lease Commitments
   Year ending August 31,
    
    ($ in thousands)2008
    
    $
    12,1642009
    
    
    8,1472010
    
    
    4,5972011
    
    
    2,4512012
    
    
    1,0422013 and thereafter
    
    
    3,198
  -163-




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AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
 (8) Contingencies
 (a) Environmental
  (b) Guarantees
  (c) General
  (9) Restructuring and Impairment Charges
 (In thousands)2007
    
    
    2006Restructuring charge
    
    $
    6,381
    
    
    $
    Impairment charges
    
    
    21,369
    
    
    
    Total
    
    $
    27,750
    
    
    $
    
    -164-




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##### Table of Contents



AGRILIANCE LLC and subsidiaries
NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
 (10) Assets and Liabilities Held for Sale
  Cash
    
    $
    8,716Net trade receivables
    
    
    146,979Rebates receivables
    
    
    47,008Other receivables
    
    
    3,522Inventories
    
    
    119,030Vendor prepayments
    
    
    930Prepaid expenses
    
    
    77Net property, plant and equipment
    
    
    15,031Other assets
    
    
    228Assets held for sale
    
    $
    341,521
  Cash overdraft
    
    $
    (3,161
    )Accounts payable
    
    
    (92,092
    )Customer prepayments
    
    
    (1,467
    )Accrued expenses
    
    
    (24,452
    )Other current liabilities
    
    
    (1,835
    )Liabilities held for sale
    
    $
    (123,007
    )
 -165-