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SECURITIES AND EXCHANGE COMMISSION
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Minnesota | 41-0365145 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) | |
4001 Lexington Avenue North | ||
Arden Hills, Minnesota | 55112 | |
(Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(g) of the Act: None
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ (Do not check if a smaller reporting company) | Smaller reporting company o |
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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. |
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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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• | 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. |
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Total Number | Total Number | |||||||||
of Facilities | of Facilities | |||||||||
Business Segment | Owned | Leased | Regional Location of Facilities | |||||||
Dairy Foods | 10 | (1) | 3 | Midwest(2) — 8 West(3) — 2 East(4) — 3 South(5) — 0 | ||||||
Feed | 96 | (6) | 46 | Midwest — 71 West — 35 East — 12 South —24 | ||||||
Seed | 17 | 6 | Midwest — 14 West — 9 | |||||||
Agronomy | 41 | 78 | Midwest — 76 West — 23 East — 7 South — 13 | |||||||
Layers | 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. |
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Years Ended December 31, | ||||||||||||||||||||
Restated | ||||||||||||||||||||
2008 | 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 | $ | 7,497.3 | ||||||||||
Cost of sales | 11,084.0 | 8,160.3 | 6,443.5 | 6,750.7 | 6,902.3 | |||||||||||||||
Gross profit | 955.3 | 764.6 | 658.8 | 585.4 | 595.0 | |||||||||||||||
Selling, general and administrative | 756.6 | 623.5 | 516.5 | 496.4 | 499.6 | |||||||||||||||
Restructuring and impairment charges(1) | 2.9 | 4.0 | 40.5 | 6.4 | 7.8 | |||||||||||||||
Gain on insurance settlement | (10.6 | ) | (5.9 | ) | — | — | — | |||||||||||||
Earnings from operations | 206.4 | 143.0 | 101.8 | 82.6 | 87.6 | |||||||||||||||
Interest expense, net | 63.2 | 49.6 | 59.1 | 78.1 | 81.2 | |||||||||||||||
Other (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) | — | — | — | — | 36.5 | |||||||||||||||
Equity 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 | 1.6 | |||||||||||||||
Earnings before income taxes and discontinued operations | 174.1 | 197.2 | 72.3 | 137.5 | 33.8 | |||||||||||||||
Income tax expense | 14.5 | 36.3 | 2.9 | 7.5 | 3.1 | |||||||||||||||
Net earnings from continuing operations | 159.6 | 160.9 | 69.4 | 130.0 | 30.7 | |||||||||||||||
Earnings (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, | ||||||||||||||||||||
Restated | ||||||||||||||||||||
2008 | 2007 (13) | 2006 (13) | 2005 (13) | 2004 (13) | ||||||||||||||||
($ in Millions) | ||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||
Depreciation and amortization | $ | 91.8 | $ | 85.6 | $ | 97.1 | $ | 99.5 | $ | 105.8 | ||||||||||
Unrealized hedging (losses) gains(6) | (51.9 | ) | 12.9 | 7.6 | 5.3 | (23.1 | ) | |||||||||||||
Capital expenditures | 171.3 | 91.1 | 83.8 | 70.4 | 96.1 | |||||||||||||||
Cash patronage paid to members(7) | 29.1 | 20.4 | 24.0 | 15.1 | 11.4 | |||||||||||||||
Equity revolvement paid to members(8) | 68.5 | 37.6 | 56.6 | 53.6 | 23.2 |
Years Ended December 31, | ||||||||||||||||||||
Restated | ||||||||||||||||||||
2008 | 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 | $ | 73.1 | ||||||||||
Restricted cash(9) | — | — | — | — | 20.3 | |||||||||||||||
Working capital(10) | 729.8 | 459.0 | 292.1 | 255.8 | 312.2 | |||||||||||||||
Property, plant and equipment, net | 658.3 | 565.3 | 679.4 | 676.0 | 712.7 | |||||||||||||||
Total assets | 4,981.3 | 4,419.2 | 3,000.4 | 3,032.3 | 3,165.5 | |||||||||||||||
Total debt(11) | 753.5 | 531.5 | 492.0 | 531.1 | 881.4 | |||||||||||||||
Capital securities of trust subsidiary | 190.7 | 190.7 | 190.7 | 190.7 | 190.7 | |||||||||||||||
Minority interests | 18.9 | 6.2 | 8.8 | 35.2 | 38.5 | |||||||||||||||
Total equities | 976.9 | 1,014.3 | 917.8 | 896.1 | 844.3 |
Years Ended December 31, | ||||||||||||||||||||
Restated | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
($ in Millions) | ||||||||||||||||||||
Selected Segment Financial Information: | ||||||||||||||||||||
Dairy Foods | ||||||||||||||||||||
Net sales | $ | 4,136.4 | $ | 4,176.8 | $ | 3,241.3 | $ | 3,684.1 | $ | 3,797.3 | ||||||||||
Earnings from operations | 25.0 | 80.6 | 68.0 | 31.3 | 37.0 | |||||||||||||||
Depreciation and amortization | 31.5 | 26.3 | 40.0 | 41.2 | 39.6 | |||||||||||||||
Capital expenditures | 84.8 | 18.0 | 19.4 | 20.5 | 53.1 | |||||||||||||||
Feed | ||||||||||||||||||||
Net sales | 3,857.4 | 3,061.6 | 2,711.4 | 2,586.9 | 2,626.6 | |||||||||||||||
Earnings from operations | 27.9 | 56.0 | 60.6 | 61.4 | 12.8 | |||||||||||||||
Depreciation and amortization | 32.0 | 27.8 | 30.7 | 32.0 | 38.5 | |||||||||||||||
Capital expenditures | 54.3 | 42.2 | 33.6 | 25.9 | 26.3 | |||||||||||||||
Seed | ||||||||||||||||||||
Net sales | 1,185.0 | 917.0 | 756.0 | 653.9 | 518.8 | |||||||||||||||
Earnings from operations | 27.4 | 39.1 | 39.3 | 30.5 | 19.9 | |||||||||||||||
Depreciation and amortization | 2.4 | 2.4 | 2.5 | 2.3 | 2.5 | |||||||||||||||
Capital expenditures | 3.0 | 2.0 | 2.7 | 2.4 | 1.6 | |||||||||||||||
Agronomy(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 | 6.1 | |||||||||||||||
Capital expenditures | 4.5 | 0.3 | — | — | — | |||||||||||||||
Layers(13) | ||||||||||||||||||||
Net sales | 606.2 | 513.9 | 398.4 | 407.0 | 541.3 | |||||||||||||||
Earnings (loss) from operations | 22.9 | 22.4 | (49.3 | ) | (12.2 | ) | 29.4 | |||||||||||||
Depreciation and amortization | 9.2 | 9.5 | 10.6 | 10.5 | 9.3 | |||||||||||||||
Capital expenditures | 18.3 | 5.1 | 11.0 | 17.7 | 8.9 | |||||||||||||||
Other/Eliminations | ||||||||||||||||||||
Net sales | (81.1 | ) | (31.9 | ) | (4.7 | ) | 4.3 | 13.2 | ||||||||||||
(Loss) earnings from operations | (22.9 | ) | (6.9 | ) | (3.7 | ) | (0.8 | ) | 1.3 | |||||||||||
Depreciation and amortization | 2.0 | 11.1 | 7.2 | 7.4 | 9.7 | |||||||||||||||
Capital expenditures | 6.4 | 23.4 | 17.0 | 4.0 | 6.2 |
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Years Ended December 31, | ||||||||||||||||||||
Restated | ||||||||||||||||||||
2008 | 2007 | 2006 (13) | 2005 | 2004 | ||||||||||||||||
($ in millions) | ||||||||||||||||||||
Restructuring charges | $ | 1.8 | $ | 0.5 | $ | 1.5 | $ | 0.3 | $ | 2.4 | ||||||||||
Impairment of assets | 1.1 | 3.5 | 39.0 | 6.1 | 5.4 | |||||||||||||||
Total | $ | 2.9 | $ | 4.0 | $ | 40.5 | $ | 6.4 | $ | 7.8 | ||||||||||
Years Ended December 31, | ||||||||||||||||||||
Restated | ||||||||||||||||||||
2008 | 2007 | 2006 (13) | 2005 | 2004 | ||||||||||||||||
($ in millions) | ||||||||||||||||||||
(Gain) loss on divestiture of businesses | $ | — | $ | (28.5 | ) | $ | (7.6 | ) | $ | — | $ | 2.7 | ||||||||
Gain 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 | $ | 7.9 | ||||||||||
Discretionary | 9.4 | 7.0 | 7.6 | 4.1 | 3.5 | |||||||||||||||
Total | $ | 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) | ||||||||||||||||||||
Revolvement | ||||||||||||||||||||
Dairy Foods(a) | $ | 10.7 | $ | 13.9 | $ | 17.0 | $ | 17.1 | $ | 19.9 | ||||||||||
Ag Services | 57.8 | 23.7 | 39.6 | 36.5 | 3.3 | |||||||||||||||
Total | $ | 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 | $ | 593.7 | ||||||||
Adjustments | (2.6 | ) | (2.1 | ) | 0.4 | 1.3 | ||||||||||
Gross profit — as adjusted | $ | 764.6 | $ | 658.8 | $ | 585.4 | $ | 595.0 | ||||||||
Restructuring and impairment charges — as previously reported | $ | 4.0 | $ | 21.2 | $ | 6.4 | $ | 7.8 | ||||||||
Adjustments | — | 19.3 | — | — | ||||||||||||
Restructuring and impairment charges — as adjusted | $ | 4.0 | $ | 40.5 | $ | 6.4 | $ | 7.8 | ||||||||
Earnings from operations — as previously reported | $ | 147.0 | $ | 124.2 | $ | 83.7 | $ | 84.9 | ||||||||
Adjustments | (4.0 | ) | (22.4 | ) | (1.1 | ) | 2.7 | |||||||||
Earnings from operations — as adjusted | $ | 143.0 | $ | 101.8 | $ | 82.6 | $ | 87.6 | ||||||||
Net earnings — as previously reported | $ | 163.8 | $ | 88.9 | $ | 131.8 | $ | 23.7 | ||||||||
Adjustments | (2.9 | ) | (19.5 | ) | 0.3 | 0.3 | ||||||||||
Net 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 | $ | 316.0 | ||||||||
Adjustments | (2.3 | ) | (0.6 | ) | 62.2 | (3.8 | ) | |||||||||
Working capital — as adjusted | $ | 459.0 | $ | 292.1 | $ | 255.8 | $ | 312.2 | ||||||||
Goodwill, net — as previously reported | $ | 318.2 | $ | 326.5 | $ | 327.1 | $ | 331.6 | ||||||||
Adjustments | (37.3 | ) | (37.3 | ) | (29.1 | ) | (3.0 | ) | ||||||||
Goodwill, net — as adjusted | $ | 280.9 | $ | 289.2 | $ | 298.0 | $ | 328.6 | ||||||||
Total assets — as previously reported | $ | 4,431.8 | $ | 3,014.9 | $ | 3,063.0 | $ | 3,169.0 | ||||||||
Adjustments | (12.6 | ) | (14.5 | ) | (30.7 | ) | (3.5 | ) | ||||||||
Total assets — as adjusted | $ | 4,419.2 | $ | 3,000.4 | $ | 3,032.3 | $ | 3,165.5 | ||||||||
Total equities — as previously reported | $ | 1,032.2 | $ | 932.7 | $ | 891.5 | $ | 840.0 | ||||||||
Adjustments | (17.9 | ) | (14.9 | ) | 4.6 | 4.3 | ||||||||||
Total equities — as adjusted | $ | 1,014.3 | $ | 917.8 | $ | 896.1 | $ | 844.3 |
• | 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 includingLAND O LAKES, theIndian Maidenlogo andAlpine Lace, as well as under regional brand names such asNew 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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($ in thousands)
Previously | Previously | |||||||||||||||||||||||
Reported | Effect of | As Adjusted | Reported | Effect of | As Restated | |||||||||||||||||||
2007 | Adjustments | 2007 | 2006 | Restatements | 2006 | |||||||||||||||||||
Cost of sales | $ | 8,157,684 | $ | 2,622 | $ | 8,160,306 | $ | 6,441,368 | $ | 2,143 | $ | 6,443,511 | ||||||||||||
Gross Profit | 767,211 | (2,622 | ) | 764,589 | 660,921 | (2,143 | ) | 658,778 | ||||||||||||||||
Selling, general and administrative | 622,231 | 1,295 | 623,526 | 515,557 | 947 | 516,504 | ||||||||||||||||||
Restructuring and Impairment charges | 3,970 | — | 3,970 | 21,169 | 19,344 | 40,513 | ||||||||||||||||||
Earnings from operations | 146,951 | (3,917 | ) | 143,034 | 124,195 | (22,434 | ) | 101,761 | ||||||||||||||||
Interest expense | 48,918 | 727 | 49,645 | 58,360 | 698 | 59,058 | ||||||||||||||||||
Other (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 | ) | 72,317 | ||||||||||||||||
Income tax expense | 38,107 | (1,776 | ) | 36,331 | 7,906 | (4,962 | ) | 2,944 | ||||||||||||||||
Net earnings | 163,797 | (2,868 | ) | 160,929 | 88,945 | (19,572 | ) | 69,373 | ||||||||||||||||
Applied to: | ||||||||||||||||||||||||
Retained earnings | 61,154 | (2,868 | ) | 58,286 | 13,928 | (19,572 | ) | (5,644 | ) | |||||||||||||||
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December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
($ in millions) | ||||||||||||
Unrealized hedging (loss) gain | $ | (51.9 | ) | $ | 12.9 | $ | 7.6 |
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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 | $ | 105.6 | ||||||
Equity in earnings from Agriliance | 0.1 | 50.6 | 12.0 |
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December 31, | December 31, | December 31, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Per pound market price average for year: | ||||||||||||
Butter | $ | 1.46 | $ | 1.37 | $ | 1.24 | ||||||
Block cheese | 1.86 | 1.76 | 1.24 | |||||||||
Nonfat dry milk (NASS) | 1.23 | 1.69 | 0.89 |
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For the Years Ended December 31 | ||||||||||||||||||||||||
Restated | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Net | 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 | 100.0 | |||||||||||||||
Cost of sales | 11,084.0 | 92.1 | 8,160.3 | 91.4 | 6,443.5 | 90.7 | ||||||||||||||||||
Gross profit | 955.3 | 7.9 | 764.6 | 8.6 | 658.8 | 9.3 | ||||||||||||||||||
Selling, general and administrative | 756.6 | 6.3 | 623.5 | 7.0 | 516.5 | 7.3 | ||||||||||||||||||
Restructuring and impairment charges | 2.9 | — | 4.0 | — | 40.5 | 0.6 | ||||||||||||||||||
Gain on insurance settlement | (10.6 | ) | (0.1 | ) | (5.9 | ) | — | — | — | |||||||||||||||
Earnings from operations | 206.4 | 1.7 | 143.0 | 1.6 | 101.8 | 1.4 | ||||||||||||||||||
Interest expense, net | 63.2 | 0.5 | 49.6 | 0.6 | 59.1 | 0.8 | ||||||||||||||||||
Other 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 | 1.0 | ||||||||||||||||||
Income 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 | |||||||||||||||
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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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 | 111.2 | |||
Acquisitions and divestitures | (111.4 | ) | ||
Total decrease | $ | (40.4 | ) |
Gross Profit Variance | Increase (decrease) | |||
($ in millions) | ||||
Margin / product mix impact | $ | (44.3 | ) | |
Volume impact | 2.4 | |||
Unrealized hedging gains and losses | (13.5 | ) | ||
Acquisitions and divestitures | (8.4 | ) | ||
Total decrease | $ | (63.8 | ) |
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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Increase | ||||
Net Sales Variance | (decrease) | |||
($ in millions) | ||||
Pricing / product mix impact | $ | 772.4 | ||
Volume impact | 32.4 | |||
Acquisitions and divestitures | (9.0 | ) | ||
Total increase | $ | 795.8 |
Increase | ||||
Gross Profit Variance | (decrease) | |||
($ in millions) | ||||
Margin / product mix impact | $ | 26.5 | ||
Volume impact | (5.1 | ) | ||
Unrealized hedging gains and losses | (34.9 | ) | ||
Acquisitions and divestitures | 0.1 | |||
Total decrease | $ | (13.4 | ) |
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 | % |
Increase | ||||
Net Sales Variance | (decrease) | |||
($ in millions) | ||||
Pricing / product mix impact | $ | 166.4 | ||
Volume impact | 98.8 | |||
Acquisitions and divestitures | 2.8 | |||
Total increase | $ | 268.0 |
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Increase | ||||
Gross Profit Variance | (decrease) | |||
($ in millions) | ||||
Margin / product mix impact | $ | 0.7 | ||
Volume impact | 13.3 | |||
Unrealized hedging gains and losses | (16.4 | ) | ||
Acquisitions and divestitures | 0.7 | |||
Total decrease | $ | (1.7 | ) |
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 | % |
Increase | ||||
Net Sales Variance | (decrease) | |||
($ in millions) | ||||
Pricing / product mix impact | $ | 92.6 | ||
Volume impact | (0.3 | ) | ||
Total increase | $ | 92.3 |
Increase | ||||
Gross 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 | ) |
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For the years ended December 31, | ||||||||||||
Restated | ||||||||||||
2007 | 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 |
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For the years ended December 31, | ||||||||||||
Restated | ||||||||||||
2007 | 2006 | Increase | ||||||||||
($ in millions) | ||||||||||||
Gross profit | $ | 764.6 | $ | 658.8 | $ | 105.8 |
For the years ended December 31, | ||||||||||||
Restated | ||||||||||||
2007 | 2006 | Increase | ||||||||||
($ in millions) | ||||||||||||
Selling, general and administrative expense | $ | 623.5 | $ | 516.5 | $ | 107.0 |
For the years ended December 31, | ||||||||||||
Restated | ||||||||||||
2007 | 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 |
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For the years ended December 31, | ||||||||||||
Restated | ||||||||||||
2007 | 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 |
For the years ended December 31, | ||||||||||||
Restated | ||||||||||||
2007 | 2006 | Increase | ||||||||||
($ in millions) | ||||||||||||
Income tax expense | $ | 36.3 | $ | 2.9 | $ | 33.4 |
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 | % |
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Increase | ||||
Net Sales Variance | (decrease) | |||
($ in millions) | ||||
Pricing / product mix impact | $ | 963.3 | ||
Volume impact | 224.5 | |||
Acquisitions and divestitures | (252.3 | ) | ||
Total increase | $ | 935.5 |
Increase | ||||
Gross Profit Variance | (decrease) | |||
($ in millions) | ||||
Margin / product mix impact | $ | 41.8 | ||
Volume impact | (7.8 | ) | ||
Unrealized hedging gains and losses | (6.4 | ) | ||
Acquisitions and divestitures | 10.5 | |||
Total increase | $ | 38.1 |
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 | % |
Increase | ||||
Net Sales Variance | (decrease) | |||
($ in millions) | ||||
Pricing / product mix impact | $ | 552.5 | ||
Volume impact | (153.4 | ) | ||
Acquisitions and divestitures | (48.9 | ) | ||
Total increase | $ | 350.2 |
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Increase | ||||
Gross Profit Variance | (decrease) | |||
($ in millions) | ||||
Margin / product mix impact | $ | 24.7 | ||
Volume impact | (21.0 | ) | ||
Unrealized hedging gains and losses | 3.6 | |||
Acquisitions and divestitures | (6.0 | ) | ||
Total increase | $ | 1.3 |
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 | % |
Increase | ||||
Net Sales Variance | (decrease) | |||
($ in millions) | ||||
Pricing / product mix impact | $ | 60.0 | ||
Volume impact | 101.0 | |||
Total increase | $ | 161.0 |
Increase | ||||
Gross Profit Variance | (decrease) | |||
($ in millions) | ||||
Margin / product mix impact | $ | 0.3 | ||
Volume impact | 10.5 | |||
Total increase | $ | 10.8 |
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For the Years Ended December 31, | ||||||||||||
Restated | ||||||||||||
2007 | 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 | % |
Increase | ||||
Net Sales Variance | (decrease) | |||
($ in millions) | ||||
Pricing / product mix impact | $ | 158.9 | ||
Volume impact | 11.3 | |||
Acquisitions and divestitures | (54.6 | ) | ||
Total increase | $ | 115.6 |
Increase | ||||
Gross Profit Variance | (decrease) | |||
($ in millions) | ||||
Margin / product mix impact | $ | 61.9 | ||
Volume impact | 0.5 | |||
Unrealized hedging gains and losses | 0.3 | |||
Acquisitions and divestitures | (4.7 | ) | ||
Total increase | $ | 58.0 |
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2008 | 2007 | |||||||
($ in millions) | ||||||||
Cash and cash equivalents | $ | 30.8 | $ | 116.8 | ||||
Availability on revolving credit facility | 188.6 | 196.0 | ||||||
Availability on receivable securitization program | 120.0 | 230.0 | ||||||
Availability on the Agriliance credit facility | — | 20.0 | ||||||
Availability on MoArk revolving credit facility | 40.0 | 40.0 | ||||||
Total liquidity | $ | 379.4 | $ | 602.8 | ||||
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Restated | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
($ in millions) | ||||||||||||
Net earnings | $ | 159.6 | $ | 160.9 | $ | 69.4 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities | 121.2 | 13.3 | 139.2 | |||||||||
Changes 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 | ||||||
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 | 42.5 | |||||||||
Proceeds from sale of investments | 21.2 | 0.6 | 9.3 | |||||||||
Proceeds from foreign currency exchange contracts on sale of investment | 3.8 | — | — | |||||||||
Proceeds from sale of property, plant and equipment | 6.2 | 10.5 | 1.7 | |||||||||
Insurance proceeds for replacement assets | 4.9 | 8.6 | — | |||||||||
Change in notes receivable | (11.6 | ) | (18.4 | ) | 15.8 | |||||||
Other | 3.0 | (0.1 | ) | 7.2 | ||||||||
Net cash used by investing activities | $ | (202.2 | ) | $ | (275.3 | ) | $ | (100.3 | ) | |||
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 | 13.7 | |||||||||
Principal 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 | ) | 4.9 | |||||||
Net cash provided (used) by financing activities | $ | 111.2 | $ | (18.5 | ) | $ | (199.2 | ) | ||||
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Payments Due by Year (as of December 31, 2008) | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
Contractual 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 | 200,913 | |||||||||||||||
Operating leases | 112,572 | 41,273 | 51,608 | 17,064 | 2,627 | |||||||||||||||
Other: | ||||||||||||||||||||
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 | 701 | |||||||||||||||
Total 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 $20.0 million of short-term borrowings from our 50% owned joint venture Agriliance, LLC. | |
(4) | Includes contractual commitments to purchase weaner pigs, feeder pigs and producer services, accounted for in our Feed and Other segments. In Feed, we enter into commitments to purchase weaner and feeder pigs from producers and generally have commitments to immediately resell the animals to swine producers. Market exposure is managed by procuring contracts to resell the pigs at terms that capture the pig cost and associated margin. In our Other segment, we account for purchase commitments used to source feeder pigs for our Aligned System program. We sold our sow herd and feeder pig inventory and the production facilities for our Aligned System program as part of the sale of swine production assets to Maschhoff West LLC in February 2005, but retained long-term agreements to supply feeder pigs to our local cooperative members. For the Aligned System program, pigs are purchased from Maschhoff West LLC utilizing fixed or variable pricing and immediately resold utilizing similar pricing under sales contracts with local cooperatives. Our profit or loss from these programs is minimal. | |
(5) | Relates to raw materials in Dairy Foods, Feed, Seed, Agronomy and Layers. These purchase commitments, estimated for this table, are contracted on a short-term basis, typically for one year or less. | |
(6) | Primarily represent contractual commitments to purchase marketing and consulting services and capital equipment. | |
(7) | Excludes contingent obligations under our pension and postretirement plans. For accounting disclosures of our pension and postretirement obligations, see Note 15 in “Item 8. Financial Statements and Supplementary Data.” |
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At December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Notional | Fair | Notional | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
($ in thousands) | ||||||||||||||||
Commodity futures and options contracts | ||||||||||||||||
Commitments to purchase | $ | 281,634 | $ | (75,045 | ) | $ | 213,544 | $ | 28,856 | |||||||
Commitments to sell | (221,926 | ) | 39,223 | (80,577 | ) | (11,501 | ) |
Year Ended December 31, | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Realized | Realized | |||||||||||||||
Notional | Gains | Notional | Gains | |||||||||||||
Amount | (Losses) | Amount | (Losses) | |||||||||||||
($ in thousands) | ||||||||||||||||
Commodity futures and options contracts | ||||||||||||||||
Total volume of exchange traded contracts: | ||||||||||||||||
Commitments to purchase | $ | 3,180,652 | $ | 9,609 | $ | 1,791,876 | $ | 29,395 | ||||||||
Commitments to sell | (3,221,418 | ) | 9,598 | (1,887,775 | ) | 8,285 |
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• | 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. |
• | Prepared fair value estimates and, among other things, consulted an independent advisor relating to the valuation of certain assets. |
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• | 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. |
By | /s/ Chris Policinski | |||
Christopher J. Policinski | ||||
President and Chief Executive Officer | ||||
By | /s/ DANIEL KNUTSON | |||
Daniel E. Knutson | ||||
Chief Financial Officer | ||||
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Name | Age | Title | ||||
Chris Policinski | 50 | President and Chief Executive Officer | ||||
Daniel Knutson | 52 | Senior Vice President and Chief Financial Officer | ||||
Steve Dunphy | 51 | Executive Vice President and Chief Operating Officer, Dairy Foods Value Added | ||||
Alan Pierson | 58 | Executive Vice President and Chief Operating Officer, Dairy Foods Industrial | ||||
Fernando Palacios | 49 | Executive Vice President and Chief Operating Officer, Feed | ||||
Mike Vandelogt | 54 | Executive Vice President and Chief Operating Officer — Seed | ||||
Rodney Schroeder | 53 | Executive Vice President and Chief Operating Officer — Crop Protection Products | ||||
David Seehusen | 62 | Executive Vice President, Ag Business Development and Member Services | ||||
Jean-Paul Ruiz-Funes | 51 | Senior Vice President, Corporate Strategy and Business Development | ||||
Barry Wolfish | 52 | Senior Vice President, Corporate Marketing Strategy | ||||
Jim Fife | 59 | Senior Vice President, Public Affairs | ||||
Peter Janzen | 49 | Senior Vice President, General Counsel | ||||
Karen Grabow | 59 | Senior Vice President, Human Resources | ||||
Dave Andresen | 55 | Director | ||||
Robert Bignami | 66 | Director | ||||
Harley Buys | 56 | Director | ||||
Mark Christenson | 57 | Director | ||||
Mark Clark | 46 | Director | ||||
Ben Curti | 58 | Director | ||||
James Deatherage | 51 | Director | ||||
Jim Hager | 57 | Director | ||||
Pete Kappelman | 46 | Director, Chairman of the Board | ||||
Cornell Kasbergen | 51 | Director | ||||
Paul Kent, Jr. | 58 | Director | ||||
Larry Kulp | 66 | Director | ||||
Robert Marley | 57 | Director | ||||
Jim Miller | 67 | Director | ||||
Ronnie Mohr | 60 | Director, First Vice Chairman of the Board | ||||
Ron Muzzall | 46 | Director | ||||
James Netto | 49 | Director | ||||
Douglas Reimer | 58 | Director, Secretary | ||||
Richard Richey | 60 | Director | ||||
Myron Voth | 55 | Director | ||||
Thomas Wakefield | 59 | Director | ||||
Al Wanner | 61 | Director | ||||
Wayne Wedepohl | 60 | Director | ||||
John Zonneveld, Jr. | 55 | Director | ||||
Howard Liszt | 62 | Nonvoting Advisory Member | ||||
Robert Thompson | 63 | Nonvoting Advisory Member | ||||
Galen Vetter | 57 | Nonvoting Advisory Member |
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• | 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 |
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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 Pont | |||
Eastman 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 Inc | |||
Sara Lee Corp. | Scotts Miracle-Gro | Seaboard Corp. | Smithfield Foods Inc. | |||
J.M. Smucker Co. | Sysco Corp. | Tyson Foods Inc. |
• | Annual base salary | ||
• | Annual and long-term variable compensation | ||
• | Long-term equity value incentive compensation | ||
• | Retirement benefits | ||
• | Perquisites and other personal benefits |
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• | 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. |
• | 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. |
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Measure as % of Total Target | ||||||||
Award Opportunity | ||||||||
Business Unit | ||||||||
Corporate Officer | Officer | |||||||
Total 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. |
• | 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. |
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• | 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. |
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1. | Land O’Lakes Employee Retirement Plan | |
2. | Non-Qualified Excess Benefit Plan (IRS Limits) | |
3. | Land O’Lakes Employee Savings and Supplemental Retirement Plan | |
4. | Non-Qualified Excess Benefit Savings Plan | |
5. | Land O’Lakes Non-Qualified Deferred Compensation Plan |
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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; or | |
3. | 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. |
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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. |
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/s/ Pete Kappelman | /s/ Ronnie Mohr | |
Pete Kappelman | Ronnie Mohr | |
/s/ John Zonneveld | /s/ Doug Reimer | |
John Zonneveld | Doug Reimer | |
/s/ Cornell Kasbergen | /s/ Paul Kent | |
Cornell Kasbergen | Paul Kent | |
/s/ Robert Marley | /s/ Jim Miller | |
Robert Marley | Jim Miller |
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(h) | ||||||||||||||||||||||||||||||||
Change in | ||||||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||||||
(f) | (g) | and | ||||||||||||||||||||||||||||||
Value | 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 | Total | ||||||||||||||||||||||||
Name & Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||
Christopher J. Policinski | 2008 | $ | 900,000 | $ | — | $ | 2,639,552 | $ | 2,668,500 | $ | 438,475 | $ | 90,673 | $ | 6,737,200 | |||||||||||||||||
President & | 2007 | 823,558 | — | 1,013,521 | 2,055,998 | 127,959 | 70,314 | 4,091,350 | ||||||||||||||||||||||||
Chief Executive Officer | 2006 | 750,000 | — | 311,774 | 682,800 | 121,671 | 131,283 | 1,997,528 | ||||||||||||||||||||||||
Daniel E. Knutson | 2008 | $ | 509,646 | $ | — | $ | 1,495,239 | $ | 1,045,157 | $ | 478,128 | $ | 48,075 | $ | 3,576,245 | |||||||||||||||||
Senior Vice President & | 2007 | 481,875 | — | 819,653 | 956,331 | 80,864 | 60,371 | 2,399,094 | ||||||||||||||||||||||||
Chief Financial Officer | 2006 | 451,690 | — | 280,067 | 308,414 | 279,162 | 42,876 | 1,362,209 | ||||||||||||||||||||||||
Fernando J. Palacios | 2008 | $ | 527,995 | $ | — | $ | 986,528 | $ | 510,360 | $ | 125,431 | $ | 75,859 | $ | 2,226,173 | |||||||||||||||||
Executive 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 | 1,037,381 | ||||||||||||||||||||||||
Barry C. Wolfish | 2008 | $ | 378,653 | $ | — | $ | 640,817 | $ | 630,457 | $ | 122,528 | $ | 37,426 | $ | 1,809,881 | |||||||||||||||||
Senior Vice President, | 2007 | 336,119 | — | 351,279 | 498,728 | 36,640 | 39,727 | 1,262,493 | ||||||||||||||||||||||||
Corporate Marketing Strategy | 2006 | 285,185 | — | 120,029 | 163,977 | 42,192 | 26,076 | 637,459 | ||||||||||||||||||||||||
Peter S. Janzen | 2008 | $ | 420,989 | $ | — | $ | 386,461 | $ | 690,926 | $ | 298,764 | $ | 40,093 | $ | 1,837,233 | |||||||||||||||||
Senior Vice President, | 2007 | 395,508 | — | 196,122 | 616,608 | 94,739 | 45,556 | 1,348,533 | ||||||||||||||||||||||||
General 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. |
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(j) | ||||||||||||||||||||||||||||
All Other Value | ||||||||||||||||||||||||||||
Appreciation | ||||||||||||||||||||||||||||
Rights (VAR) | ||||||||||||||||||||||||||||
Unit Awards: | (l) | |||||||||||||||||||||||||||
Estimated Future Payouts Under Non-Equity | Number of | Grant Date | ||||||||||||||||||||||||||
Incentive Plan Awards1 | Securities | (k) | Fair Value of | |||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | Underlying | VAR Unit | VAR unit | |||||||||||||||||||||
Name | Grant Date2 | Threshold ($)3 | Target ($) | Maximum ($) | VAR Units | Exercise Price | Awards4 | |||||||||||||||||||||
Christopher J. Policinski | 1/1/2008 | $ | 360,000 | $ | 900,000 | $ | 1,125,000 | 12,000 | $ | 69.77 | — | |||||||||||||||||
(CEO) | 7/1/2008 | 36,000 | $ | 69.77 | ||||||||||||||||||||||||
Daniel 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. |
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Value Appreciation Rights (VAR) Unit Awards | ||||||||||||||||||||||||
(e) Equity Incentive | ||||||||||||||||||||||||
(c) | (d) | Plan Awards: | ||||||||||||||||||||||
Number of | Number of | Number of | ||||||||||||||||||||||
Securities | Securities | Securities | ||||||||||||||||||||||
Underlying | Underlying | Underlying | ||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | (f) | (g) | ||||||||||||||||||||
(a) | (b) | VAR Units (#) | VAR Units (#) | Unearned VAR | VAR Units | VAR Units | ||||||||||||||||||
Name | Date of Grant | Exercisable1 | Unexercisable | Units (#) | Exercise Price | Expiration Date2 | ||||||||||||||||||
Christopher 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 | — | — | $ | 35.69 | |||||||||||||||||||
1/1/2001 | 3,000 | — | — | $ | 51.50 | |||||||||||||||||||
Barry 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 $269,070. The distribution election was made in 2007 in accordance with IRC 409A. The number of Unexercised VAR Units (#) Exercisable shown in Column C for Mr. Janzen is net of the distributed VAR Units. |
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(b) | (c) | (d) | (f) | |||||||||||||||||
Executive | Registrant | Aggregate | (e) | Aggregate | ||||||||||||||||
Contributions in | Contributions in | Earnings in | Aggregate | Balance at | ||||||||||||||||
Last Fiscal | Last Fiscal | Last Fiscal | Withdrawals/ | Last Fiscal | ||||||||||||||||
(a) | Year1 | Year2 | Year | Distributions | Year End | |||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
Christopher J. Policinski (CEO) | $ | — | $ | 39,013 | $ | 21,876 | $ | — | $ | 327,521 | ||||||||||
Daniel E. Knutson (CFO) | 143,000 | 16,359 | 72,354 | — | 1,172,911 | |||||||||||||||
Fernando J. Palacios | 227,099 | 20,701 | 54,365 | — | 895,343 | |||||||||||||||
Barry C. Wolfish | 25,346 | 8,793 | 15,348 | — | 240,562 | |||||||||||||||
Peter 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. |
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Present Value of | ||||||||||||||
Accumulated | Payments During | |||||||||||||
Number of Years | Benefit2 | Last Fiscal Year | ||||||||||||
Name | 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 report | |
2) | 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: |
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Value Equivalent of | ||||||||||||||||||||
Salary and | Accelerated | |||||||||||||||||||
Incentive1 | Benefits2 | Unvested VAR Units | Outplacement | Total | ||||||||||||||||
Christopher 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 | Total | ||||||||||||||||
Christopher 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. |
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(b) | (f) | |||||||
(a) | Fees Earned or Paid in Cash1 | Total | ||||||
Name | ($) | ($) | ||||||
David Andresen | $ | 35,850 | $ | 35,850 | ||||
Robert Bignami | 37,950 | 37,950 | ||||||
Lynn Boadwine | 10,350 | 10,350 | ||||||
Harley Buys | 39,450 | 39,450 | ||||||
Mark Clark | 40,050 | 40,050 | ||||||
Dennis Cihlar | 37,950 | 37,950 | ||||||
Ben Curti | 43,950 | 43,950 | ||||||
Jim Hager | 40,350 | 40,350 | ||||||
Pete Kappelman | 71,150 | 71,150 | ||||||
Cornell Kasbergen | 40,200 | 40,200 | ||||||
Paul Kent, Jr. | 54,150 | 54,150 | ||||||
Larry Kulp | 41,700 | 41,700 | ||||||
Charles Lindner | 40,200 | 40,200 | ||||||
Howard Liszt | 48,000 | 48,000 | ||||||
Robert Marley | 42,000 | 42,000 | ||||||
Jim Miller | 35,550 | 35,550 | ||||||
Ronnie Mohr | 39,150 | 39,150 | ||||||
Ron Muzzall | 42,000 | 42,000 | ||||||
James Netto | 41,700 | 41,700 | ||||||
Art Perdue | 6,550 | 6,550 | ||||||
Doug Reimer | 43,350 | 43,350 | ||||||
Rich Richey | 38,100 | 38,100 | ||||||
Mary Shefland | 39,400 | 39,400 | ||||||
Robert Thompson | 50,500 | 50,500 | ||||||
Floyd Trammell | 39,750 | 39,750 | ||||||
Myron Voth | 37,350 | 37,350 | ||||||
Tom Wakefield | 39,450 | 39,450 | ||||||
Al Wanner | 42,150 | 42,150 | ||||||
John 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 $300. |
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2008 | 2007 | |||||||
($ in thousands) | ||||||||
Audit fees(1) | $ | 3,461 | $ | 1,242 | ||||
Audit-related fees(2) | 134 | 150 | ||||||
Audit and audit-related fees | 3,595 | 1,392 | ||||||
Tax fees(3) | 15 | 9 | ||||||
Total 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. |
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• | Consolidated Financial Statements: |
Land O’Lakes, Inc. | ||||
Financial Statements for the years ended December 31, 2008, 2007 and 2006 | ||||
93 | ||||
94 | ||||
95 | ||||
96 | ||||
97 | ||||
98 |
Agriliance LLC | ||||
Financial Statements (unaudited) for the three months ended November 30, 2008 and the three months ended November 30, 2007 | ||||
137 | ||||
138 | ||||
139 | ||||
140 | ||||
Financial Statements for the year ended August 31, 2008 (unaudited) | ||||
141 | ||||
142 | ||||
143 | ||||
144 | ||||
145 | ||||
Financial Statements for the years ended August 31, 2007 and 2006 | ||||
153 | ||||
154 | ||||
155 | ||||
156 | ||||
157 | ||||
158 |
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Exhibit | Description | |
3.1 | 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) |
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Exhibit | Description | |
10.32 | 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. |
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LAND O’LAKES, INC. | |||||
By | /s/ DANIEL KNUTSON | ||||
Daniel Knutson | |||||
Senior 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 Accounting | |
Daniel Knutson | Officer) | |
/s/ DAVID ANDRESEN | Director | |
David Andresen | ||
/s/ ROBERT BIGNAMI | Director | |
Robert Bignami | ||
/s/ HARLEY BUYS | Director | |
Harley Buys | ||
/s/ MARK CHRISTENSON | Director | |
Mark Christenson | ||
/s/ MARK CLARK | Director | |
Mark Clark | ||
/s/ BEN CURTI | Director | |
Ben Curti | ||
/s/ JAMES DEATHERAGE | Director | |
James Deatherage | ||
/s/ JIM HAGER | Director | |
Jim Hager | ||
/s/ PETE KAPPELMAN | Director, Chairman of the Board | |
Pete Kappelman | ||
/s/ CORNELL KASBERGEN | Director | |
Cornell Kasbergen | ||
/s/ PAUL KENT, JR. | Director | |
Paul Kent, Jr. | ||
/s/ LARRY KULP | Director | |
Larry Kulp | ||
/s/ ROBERT MARLEY | Director | |
Robert Marley |
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/s/ JIM MILLER | Director | |
Jim Miller | ||
/s/ RONNIE MOHR | Director | |
Ronnie Mohr | ||
/s/ RON MUZZALL | Director | |
Ron Muzzall | ||
/s/ JAMES NETTO | Director | |
James Netto | ||
/s/ DOUGLAS REIMER | Director | |
Douglas Reimer | ||
/s/ RICHARD RICHEY | Director | |
Richard Richey | ||
/s/ MYRON VOTH | Director | |
Myron Voth | ||
/s/ THOMAS WAKEFIELD | Director | |
Thomas Wakefield | ||
/s/ AL WANNER | Director | |
Al Wanner | ||
/s/ WAYNE WEDEPOHL | Director | |
Wayne Wedepohl | ||
/s/ JOHN ZONNEVELD | Director | |
John Zonneveld |
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Land O’Lakes, Inc. | ||||
Financial Statements for the years ended December 31, 2008, 2007 and 2006 | ||||
93 | ||||
94 | ||||
95 | ||||
96 | ||||
97 | ||||
98 |
Agriliance LLC | ||||
Financial Statements (unaudited) for the three months ended November 30, 2008 and the three months ended November 30, 2007 | ||||
137 | ||||
138 | ||||
139 | ||||
140 | ||||
Financial Statements for the year ended August 31, 2008 (unaudited) | ||||
141 | ||||
142 | ||||
143 | ||||
144 | ||||
145 | ||||
Financial Statements for the years ended August 31, 2007 and 2006 | ||||
153 | ||||
154 | ||||
155 | ||||
156 | ||||
157 | ||||
158 |
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Land O’Lakes, Inc.:
February 24, 2009
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December 31, | December 31, | |||||||
2008 | 207 | |||||||
($ in thousands) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 30,820 | $ | 116,839 | ||||
Receivables, net | 1,104,261 | 1,006,931 | ||||||
Inventories | 1,083,978 | 964,515 | ||||||
Prepaid assets | 1,101,005 | 857,257 | ||||||
Other current assets | 123,504 | 76,357 | ||||||
Total current assets | 3,443,568 | 3,021,899 | ||||||
Investments | 314,487 | 304,013 | ||||||
Property, plant and equipment, net | 658,261 | 565,293 | ||||||
Goodwill, net | 277,176 | 280,942 | ||||||
Other intangibles, net | 120,982 | 125,004 | ||||||
Other assets | 166,838 | 122,044 | ||||||
Total assets | $ | 4,981,312 | $ | 4,419,195 | ||||
Liabilities and Equities | ||||||||
Current liabilities: | ||||||||
Notes and short-term obligations | $ | 409,370 | $ | 132,170 | ||||
Current portion of long-term debt | 2,864 | 3,082 | ||||||
Accounts payable | 1,175,995 | 1,150,353 | ||||||
Customer advances | 1,045,705 | 926,240 | ||||||
Accrued liabilities | 423,494 | 341,421 | ||||||
Patronage refunds and other member equities payable | 37,751 | 28,065 | ||||||
Total current liabilities | 3,095,179 | 2,581,331 | ||||||
Long-term debt | 531,955 | 586,909 | ||||||
Employee benefits and other liabilities | 358,404 | 230,444 | ||||||
Minority interests | 18,922 | 6,175 | ||||||
Commitments and contingencies (Note 21) | ||||||||
Equities: | ||||||||
Capital stock | 1,611 | 1,701 | ||||||
Member equities | 947,141 | 937,126 | ||||||
Accumulated other comprehensive loss | (150,277 | ) | (61,931 | ) | ||||
Retained earnings | 178,377 | 137,440 | ||||||
Total equities | 976,852 | 1,014,336 | ||||||
Total liabilities and equities | $ | 4,981,312 | $ | 4,419,195 | ||||
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Years Ended December 31, | ||||||||||||
(Restated) | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
($ in thousands) | ||||||||||||
Net sales | $ | 12,039,259 | $ | 8,924,895 | $ | 7,102,289 | ||||||
Cost of sales | 11,083,910 | 8,160,306 | 6,443,511 | |||||||||
Gross profit | 955,349 | 764,589 | 658,778 | |||||||||
Selling, general and administrative | 756,606 | 623,526 | 516,504 | |||||||||
Restructuring and impairment charges | 2,893 | 3,970 | 40,513 | |||||||||
Gain on insurance settlements | (10,638 | ) | (5,941 | ) | — | |||||||
Earnings from operations | 206,488 | 143,034 | 101,761 | |||||||||
Interest expense, net | 63,232 | 49,645 | 59,058 | |||||||||
Other 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 | 1,449 | |||||||||
Earnings before income taxes | 174,128 | 197,260 | 72,317 | |||||||||
Income tax expense | 14,508 | 36,331 | 2,944 | |||||||||
Net earnings | $ | $159,620 | $ | $160,929 | $ | $69,373 | ||||||
Applied to: | ||||||||||||
Member equities | ||||||||||||
Allocated patronage | $ | 114,170 | $ | 97,147 | $ | 72,002 | ||||||
Deferred equities | 2,231 | 5,496 | 3,015 | |||||||||
116,401 | 102,643 | 75,017 | ||||||||||
Retained earnings | 43,219 | 58,286 | (5,644 | ) | ||||||||
$ | 159,620 | $ | 160,929 | $ | 69,373 | |||||||
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Years Ended December 31, | ||||||||||||
(Restated) | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
($ in thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net earnings | $ | 159,620 | $ | 160,929 | $ | 69,373 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 91,809 | 85,560 | 97,078 | |||||||||
Amortization of deferred financing costs | 4,443 | 2,981 | 2,924 | |||||||||
Gain on extinguishment of debt | (379 | ) | — | — | ||||||||
Bad debt expense | 6,850 | 22,818 | 1,706 | |||||||||
Proceeds from patronage revolvement received | 7,490 | 6,706 | 9,163 | |||||||||
Non-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 | ) | 2,893 | |||||||
Increase in other liabilities | 17,851 | 4,156 | 5,268 | |||||||||
Restructuring and impairment charges | 2,893 | 3,970 | 40,513 | |||||||||
Gain 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 | 4,736 | |||||||||
Minority interests | 16,128 | 1,469 | 1,449 | |||||||||
Other | (1,496 | ) | (3,638 | ) | (4,011 | ) | ||||||
Changes in current assets and liabilities, net of acquisitions and divestitures: | ||||||||||||
Receivables | (88,736 | ) | (294,013 | ) | 38,829 | |||||||
Inventories | (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 | 23,643 | |||||||||
Accrued liabilities | 58,515 | 75,985 | 60,377 | |||||||||
Net cash provided by operating activities | 4,947 | 330,959 | 199,903 | |||||||||
Cash 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 | 42,466 | |||||||||
Proceeds from sale of investments | 21,213 | 626 | 9,274 | |||||||||
Proceeds from foreign currency exchange contracts on sale of investment | 3,850 | — | — | |||||||||
Proceeds from sale of property, plant and equipment | 6,215 | 10,502 | 1,754 | |||||||||
Insurance proceeds for replacement assets | 4,903 | 8,635 | — | |||||||||
Change in notes receivable | (11,596 | ) | (18,406 | ) | 15,781 | |||||||
Other | 3,050 | (202 | ) | 7,183 | ||||||||
Net 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 | 13,710 | |||||||||
Principal 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 | ) | 4,933 | |||||||
Net 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 | 179,704 | |||||||||
Cash and cash equivalents at end of year | $ | 30,820 | $ | 116,839 | $ | 79,707 | ||||||
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Accumulated | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||
Capital | Member Equities | Comprehensive | Retained | Total | ||||||||||||||||||||||||
Stock | 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 | $ | 891,469 | ||||||||||||
Prior period adjustments (see Note 1) | — | — | — | — | — | 4,608 | 4,608 | |||||||||||||||||||||
Balance, December 31, 2005 As Adjusted | 1,967 | 916,210 | (22,692 | ) | 893,518 | (75,163 | ) | 75,755 | 896,077 | |||||||||||||||||||
Capital stock issued | 2 | — | — | — | — | — | 2 | |||||||||||||||||||||
Capital 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 | — | — | 29,622 | |||||||||||||||||||||
Equities issued for prior merger | — | 13,896 | — | 13,896 | — | — | 13,896 | |||||||||||||||||||||
Other, net | — | (8,614 | ) | (16 | ) | (8,630 | ) | — | 7,917 | (713 | ) | |||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
2006 earnings, as applied | — | 72,002 | 3,015 | 75,017 | — | (5,644 | ) | 69,373 | ||||||||||||||||||||
Other comprehensive income | — | — | — | — | 8,887 | — | 8,887 | |||||||||||||||||||||
Total comprehensive income | 78,260 | |||||||||||||||||||||||||||
Patronage 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 | 917,763 | |||||||||||||||||||
Capital stock issued | 6 | — | — | — | — | — | 6 | |||||||||||||||||||||
Capital 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 | — | — | 18,626 | |||||||||||||||||||||
Other, net | — | (2,209 | ) | (3 | ) | (2,212 | ) | — | 1,126 | (1,086 | ) | |||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
2007 earnings, as applied | — | 97,147 | 5,496 | 102,643 | — | 58,286 | 160,929 | |||||||||||||||||||||
Other comprehensive income | — | — | — | — | 66,787 | — | 66,787 | |||||||||||||||||||||
Total comprehensive income | 227,716 | |||||||||||||||||||||||||||
Adjustment 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 | 1,014,336 | |||||||||||||||||||
Capital stock issued | 15 | — | — | — | — | — | 15 | |||||||||||||||||||||
Capital 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 | — | — | 28,065 | |||||||||||||||||||||
Other, net | — | 852 | 38 | 890 | — | (1,212 | ) | (322 | ) | |||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
2008 earnings, as applied | — | 114,170 | 2,231 | 116,401 | — | 43,219 | 159,620 | |||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (88,675 | ) | — | (88,675 | ) | |||||||||||||||||||
Total comprehensive income | 70,945 | |||||||||||||||||||||||||||
Effects 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 | ||||||||||||
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($ in thousands in tables)
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Previously | Previously | |||||||||||||||||||||||
Reported | Effect of | As Adjusted | Reported | Effect of | As Restated | |||||||||||||||||||
2007 | Adjustments | 2007 | 2006 | Restatements | 2006 | |||||||||||||||||||
Cost of sales | $ | 8,157,684 | $ | 2,622 | $ | 8,160,306 | $ | 6,441,368 | $ | 2,143 | $ | 6,443,511 | ||||||||||||
Gross profit | 767,211 | (2,622 | ) | 764,589 | 660,921 | (2,143 | ) | 658,778 | ||||||||||||||||
Selling, general and administrative | 622,231 | 1,295 | 623,526 | 515,557 | 947 | 516,504 | ||||||||||||||||||
Restructuring and Impairment charges | 3,970 | — | 3,970 | 21,169 | 19,344 | 40,513 | ||||||||||||||||||
Earnings from operations | 146,951 | (3,917 | ) | 143,034 | 124,195 | (22,434 | ) | 101,761 | ||||||||||||||||
Interest expense | 48,918 | 727 | 49,645 | 58,360 | 698 | 59,058 | ||||||||||||||||||
Other (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 | ) | 72,317 | ||||||||||||||||
Income tax expense | 38,107 | (1,776 | ) | 36,331 | 7,906 | (4,962 | ) | 2,944 | ||||||||||||||||
Net earnings | 163,797 | (2,868 | ) | 160,929 | 88,945 | (19,572 | ) | 69,373 | ||||||||||||||||
Applied to: | ||||||||||||||||||||||||
Retained earnings | 61,154 | (2,868 | ) | 58,286 | 13,928 | (19,572 | ) | (5,644 | ) | |||||||||||||||
Previously | ||||||||||||
Reported | Effect of | As Adjusted | ||||||||||
2007 | Adjustments | 2007 | ||||||||||
Total current assets | $ | 3,020,272 | $ | 1,627 | $ | 3,021,899 | ||||||
Investments | 303,978 | 35 | 304,013 | |||||||||
Property, plant and equipment, net | 551,752 | 13,541 | 565,293 | |||||||||
Goodwill, net | 318,224 | (37,282 | ) | 280,942 | ||||||||
Other intangibles, net | 119,167 | 5,837 | 125,004 | |||||||||
Other assets | 118,438 | 3,606 | 122,044 | |||||||||
Total assets | 4,431,831 | (12,636 | ) | 4,419,195 | ||||||||
Total current liabilities | 2,579,486 | 1,845 | 2,581,331 | |||||||||
Long-term debt | 611,602 | (24,693 | ) | 586,909 | ||||||||
Employee benefits and other liabilities | 202,400 | 28,044 | 230,444 | |||||||||
Retained earnings | 155,272 | (17,832 | ) | 137,440 | ||||||||
Total equities | 1,032,168 | (17,832 | ) | 1,014,336 | ||||||||
Total liabilities and equities | 4,431,831 | (12,636 | ) | 4,419,195 | ||||||||
Previously | Previously | |||||||||||||||||||||||
Reported | Effect of | As Adjusted | Reported | Effect of | As Restated | |||||||||||||||||||
2007 | Adjustments | 2007 | 2006 | Restatements | 2006 | |||||||||||||||||||
Retained earnings | $ | 155,272 | $ | (17,832 | ) | $ | 137,440 | $ | 92,992 | $ | (14,964 | ) | $ | 78,028 | ||||||||||
Total equities | 1,032,168 | (17,832 | ) | 1,014,336 | 932,727 | (14,964 | ) | 917,763 | ||||||||||||||||
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Previously | Previously | |||||||||||||||||||||||
Reported | Effect of | As Adjusted | Reported | Effect of | As Restated | |||||||||||||||||||
2007 | Adjustments | 2007 | 2006 | Restatements | 2006 | |||||||||||||||||||
Net earnings | $ | 163,797 | $ | (2,868 | ) | $ | 160,929 | $ | 88,945 | $ | (19,572 | ) | $ | 69,373 | ||||||||||
Depreciation and amortization | 84,140 | 1,420 | 85,560 | 95,239 | 1,839 | 97,078 | ||||||||||||||||||
Amortization of deferred financing costs | 2,253 | 728 | 2,981 | 2,226 | 698 | 2,924 | ||||||||||||||||||
Bad debt expense | 22,579 | 239 | 22,818 | 1,421 | 285 | 1,706 | ||||||||||||||||||
Deferred income tax benefit | (29,655 | ) | (1,776 | ) | (31,431 | ) | 13,500 | (4,962 | ) | 8,538 | ||||||||||||||
Increase in other liabilities | 1,975 | 2,181 | 4,156 | 2,895 | 2,373 | 5,268 | ||||||||||||||||||
Restructuring and impairment charges | 3,970 | — | 3,970 | 21,169 | 19,344 | 40,513 | ||||||||||||||||||
Gain 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 | 38,829 | ||||||||||||||||
Changes 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 | 60,377 | ||||||||||||||||||
Net cash provided by operating activities | 328,778 | 2,181 | 330,959 | 196,530 | 3,373 | 199,903 | ||||||||||||||||||
Increase (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 | ) | 13,710 | ||||||||||||||||
Principal 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 | ) | ||||||||||||
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Receivables | $ | 104,096 | ||
Inventories | 307,152 | |||
Other current assets | 712 | |||
Property, plant and equipment | 30,338 | |||
Goodwill | 27,079 | |||
Other intangibles | 27,051 | |||
Investments | 1,325 | |||
Other assets | 307 | |||
Accounts 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 | 2006 | |||||||
Net sales | $ | 9,899,095 | $ | 8,270,020 | ||||
Net earnings | 149,241 | 108,468 | ||||||
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2008 | 2007 | |||||||
Trade accounts | $ | 846,794 | $ | 834,070 | ||||
Notes and contracts | 89,736 | 92,207 | ||||||
Vendor rebates | 57,007 | 26,050 | ||||||
Other | 130,591 | 68,729 | ||||||
1,124,128 | 1,021,056 | |||||||
Less allowance for doubtful accounts | (19,867 | ) | (14,125 | ) | ||||
Total receivables, net | $ | 1,104,261 | $ | 1,006,931 | ||||
2008 | 2007 | |||||||
Raw materials | $ | 217,087 | $ | 190,586 | ||||
Work in process | 1,639 | 5,058 | ||||||
Finished goods | 865,252 | 768,871 | ||||||
Total inventories | $ | 1,083,978 | $ | 964,515 | ||||
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2008 | 2007 | |||||||
Agriliance LLC | $ | 176,191 | $ | 150,945 | ||||
Advanced Food Products, LLC | 33,870 | 34,287 | ||||||
Ag Processing Inc | 31,858 | 32,832 | ||||||
Delta Egg Farm, LLC | 11,464 | 7,614 | ||||||
Universal Cooperatives, Inc. | 7,877 | 7,802 | ||||||
Melrose Dairy Proteins, LLC | 6,397 | 3,856 | ||||||
CoBank, ACB | 4,892 | 4,396 | ||||||
Hi-Plains, LLC | 3,244 | 1,902 | ||||||
Wilco-Winfield, LLC | 3,131 | — | ||||||
Prairie Farms Dairy, Inc. | 2,954 | 3,518 | ||||||
Agronomy Company of Canada Ltd. | — | 21,909 | ||||||
Other — principally cooperatives and joint ventures | 32,609 | 34,952 | ||||||
Total investments | $ | 314,487 | $ | 304,013 | ||||
Agriliance LLC | 2008 | 2007 | ||||||
Net sales | $ | 926,712 | $ | 3,447,217 | ||||
Gross profit | 134,146 | 447,630 | ||||||
Net earnings | 1,096 | 102,485 | ||||||
Current assets | 450,709 | 696,332 | ||||||
Non-current assets | 21,863 | 66,099 | ||||||
Current liabilities | 108,298 | 426,674 | ||||||
Non-current liabilities | 11,892 | 33,867 | ||||||
Total equity | 352,382 | 301,890 | ||||||
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2008 | 2007 | |||||||
Machinery and equipment | $ | 668,279 | $ | 606,245 | ||||
Buildings and building equipment | 393,156 | 372,072 | ||||||
Land and land improvements | 68,977 | 64,962 | ||||||
Software | 102,570 | 89,242 | ||||||
Construction in progress | 93,402 | 35,143 | ||||||
1,326,384 | 1,167,664 | |||||||
Less accumulated depreciation | 668,123 | 602,371 | ||||||
Total property, plant and equipment, net | $ | 658,261 | $ | 565,293 | ||||
2008 | 2007 | |||||||
Feed | $ | 126,959 | $ | 127,404 | ||||
Dairy Foods | 68,525 | 69,451 | ||||||
Agronomy | 50,663 | 52,371 | ||||||
Layers | 20,347 | 20,998 | ||||||
Seed | 10,682 | 10,718 | ||||||
Total goodwill | $ | 277,176 | $ | 280,942 | ||||
2008 | 2007 | |||||||
Amortized other intangible assets: | ||||||||
Dealer networks and customer relationships, less accumulated amortization of $4,045 and $1,627, respectively | $ | 50,478 | $ | 51,822 | ||||
Patents, less accumulated amortization of $8,414 and $7,250, respectively | 8,297 | 9,461 | ||||||
Trademarks, less accumulated amortization of $2,668 and $1,976, respectively | 4,946 | 5,639 | ||||||
Other intangible assets, less accumulated amortization of $4,412 and $4,863, respectively | 5,636 | 6,457 | ||||||
Total amortized other intangible assets | 69,357 | 73,379 | ||||||
Total non-amortized other intangible assets — trademarks and license agreements | 51,625 | 51,625 | ||||||
Total other intangible assets | $ | 120,982 | $ | 125,004 | ||||
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2008 | 2007 | |||||||
Employee compensation and benefits | $ | 141,376 | $ | 116,249 | ||||
Unrealized hedging losses and deferred option premiums received | 99,964 | 31,679 | ||||||
Marketing programs and consumer incentives | 70,209 | 63,157 | ||||||
Other | 111,945 | 130,336 | ||||||
Total accrued liabilities | $ | 423,494 | $ | 341,421 | ||||
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2008 | 2007 | |||||||
Senior unsecured notes, due 2011 (8.75%) | $ | 174,002 | $ | 192,743 | ||||
Senior secured notes, due 2010 (9.00%) | 149,700 | 175,000 | ||||||
Capital Securities of Trust Subsidiary, due 2028 (7.45%) | 190,700 | 190,700 | ||||||
MoArk, LLC debt, due 2009 through 2023 (8.53% weighted average) | 15,449 | 26,490 | ||||||
MoArk Capital lease obligations (6.00% to 8.25%) | 4,668 | 6,000 | ||||||
Other debt, including discounts and fair value adjustments | 300 | (942 | ) | |||||
534,819 | 589,991 | |||||||
Less current portion | 2,864 | 3,082 | ||||||
Total long-term debt | $ | 531,955 | $ | 586,909 | ||||
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Year | Amount | |||
2009 | $ | 2,864 | ||
2010 | 152,444 | |||
2011 | 175,967 | |||
2012 | 1,343 | |||
2013 | 1,288 | |||
2014 and thereafter | 200,913 | |||
(Restated) | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net earnings | $ | 159,620 | $ | 160,929 | $ | 69,373 | ||||||
Pension and other postretirement adjustments, net of income taxes of $52,858, $(39,871) and $(5,734), respectively | (85,333 | ) | 64,366 | 9,108 | ||||||||
Unrealized (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 | 183 | ||||||||
Total comprehensive income | $ | 70,945 | $ | 227,716 | $ | 78,260 | ||||||
2008 | 2007 | |||||||
Pension 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 | 275 | ||||||
Foreign currency translation adjustment, net of income taxes of $(201) and $(2,106), respectively | 324 | 3,400 | ||||||
Accumulated other comprehensive loss | $ | (150,277 | ) | $ | (61,931 | ) | ||
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2008 | 2007 | |||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||
Financial Derivatives: | ||||||||||||||||
Commodity derivative assets | $ | 50,053 | $ | 50,053 | $ | 30,671 | $ | 30,671 | ||||||||
Commodity derivative liabilities | 85,292 | 85,292 | 13,331 | 13,331 | ||||||||||||
Foreign currency exchange contract assets | 342 | 342 | 15 | 15 | ||||||||||||
Foreign currency exchange contract liabilities | 925 | 925 | — | — | ||||||||||||
Loans receivable | 137,869 | 140,762 | 124,346 | 124,332 | ||||||||||||
Available-for-sale securities | 47 | 47 | 488 | 488 | ||||||||||||
Debt: | ||||||||||||||||
Senior unsecured notes, due 2011 | 174,002 | 161,410 | 192,743 | 200,812 | ||||||||||||
Senior secured notes, due 2010 | 149,700 | 150,999 | 175,000 | 188,885 | ||||||||||||
Capital Securities of Trust Subsidiary, due 2028 | 190,700 | 107,580 | 190,700 | 165,455 | ||||||||||||
MoArk fixed rate debt | 20,117 | 17,548 | 32,490 | 33,633 | ||||||||||||
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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: | ||||||||||||||||
Significant | ||||||||||||||||
Quoted prices | other | Significant | ||||||||||||||
Total carrying | in active | observable | unobservable | |||||||||||||
value at | markets | inputs | inputs | |||||||||||||
December 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 | — | — | ||||||||||||
(Restated) | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Current expense: | ||||||||||||
Federal | $ | 16,516 | $ | 59,354 | $ | (6,801 | ) | |||||
State | 3,409 | 8,408 | 1,163 | |||||||||
19,925 | 67,762 | (5,638 | ) | |||||||||
Deferred benefit: | ||||||||||||
Federal | (4,689 | ) | (26,797 | ) | 7,882 | |||||||
State | (728 | ) | (4,634 | ) | 700 | |||||||
(5,417 | ) | (31,431 | ) | 8,582 | ||||||||
Income tax expense | $ | 14,508 | $ | 36,331 | $ | 2,944 | ||||||
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(Restated) | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Statutory 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 | 1.7 | |||||||||
Amortization of goodwill | 0.3 | 0.7 | 18.6 | |||||||||
Effect 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 | 1.6 | |||||||||
Tax 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 | 2007 | |||||||
Deferred tax assets related to: | ||||||||
Deferred patronage | $ | 40,507 | $ | 38,370 | ||||
Accrued liabilities | 156,064 | 89,124 | ||||||
Allowance for doubtful accounts | 6,930 | 12,248 | ||||||
Asset impairments | 7,592 | 8,808 | ||||||
Inventories | 11,592 | — | ||||||
Joint ventures | 20,811 | 26,002 | ||||||
Loss carryforwards | 12,646 | 8,301 | ||||||
Deferred revenue | 3,323 | 5,692 | ||||||
Gross deferred tax assets | 259,465 | 188,545 | ||||||
Valuation allowance | (16,620 | ) | (16,082 | ) | ||||
Total deferred tax assets | 242,845 | 172,463 | ||||||
Deferred tax liabilities related to: | ||||||||
Property, plant and equipment | 91,103 | 80,040 | ||||||
Inventories | — | 9,461 | ||||||
Intangibles | 29,128 | 23,697 | ||||||
Other, net | 11,534 | 4,638 | ||||||
Total deferred tax liabilities | 131,765 | 117,836 | ||||||
Net deferred tax assets | $ | 111,080 | $ | 54,627 | ||||
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2008 | 2007 | |||||||
Other current assets | $ | 59,528 | $ | 40,879 | ||||
Other assets | 51,552 | 13,748 | ||||||
Total net deferred tax assets | $ | 111,080 | $ | 54,627 | ||||
Gross unrecognized tax benefits at January 1, 2008 | $ | 17,187 | ||
Increases in tax positions for current year | 853 | |||
Increases in tax positions for prior years | 1,614 | |||
Gross unrecognized tax benefits at December 31, 2008 | $ | 19,654 | ||
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2007 | ||||||||||||
Pre-SFAS 158 | ||||||||||||
with Additional | ||||||||||||
Minimum | SFAS 158 | 2007 | ||||||||||
Liability (AML) | Adoption | Post | ||||||||||
Adjustments | Adjustments | SFAS 158 | ||||||||||
Investments | $ | 305,297 | $ | (1,284 | ) | $ | 304,013 | |||||
Other assets | 84,161 | 37,883 | 122,044 | |||||||||
Employee benefits and other liabilities | 131,403 | 99,041 | 230,444 | |||||||||
Accumulated other comprehensive income (loss), net of income tax | 511 | (62,442 | ) | (61,931 | ) | |||||||
Accumulated other comprehensive loss, pretax | (5,123 | ) | (101,122 | ) | (106,245 | ) |
Pension Benefits | ||||||||||||||||
Qualified Plan | Non-qualified Plans | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Change in benefit obligation: | ||||||||||||||||
Benefit obligation at beginning of year | $ | 508,707 | $ | 539,631 | $ | 51,102 | $ | 55,425 | ||||||||
Service cost | 14,251 | 13,725 | 438 | 540 | ||||||||||||
Interest cost | 32,523 | 30,103 | 3,209 | 3,080 | ||||||||||||
Plan 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 | $ | 51,102 | ||||||||
Change 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 | 4,270 | ||||||||||||
Benefits 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 | 10,067 | ||||||||||||
Ending balance | $ | 219,253 | $ | 69,047 | $ | 10,318 | $ | 8,553 | ||||||||
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Pension Benefits | ||||||||||||||||
Qualified Plan | Non-qualified Plans | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Projected benefit obligation | $ | 511,799 | $ | 508,707 | $ | 52,366 | $ | 51,102 | ||||||||
Fair value of plan assets | 386,829 | 519,869 | — | — | ||||||||||||
Funded status at end of measurement date | $ | (124,970 | ) | $ | 11,162 | $ | (52,366 | ) | $ | (51,102 | ) | |||||
Other Postretirement Benefits | ||||||||
2008 | 2007 | |||||||
Change in benefit obligation: | ||||||||
Benefit obligation at beginning of year | $ | 62,600 | $ | 71,972 | ||||
Service cost | 724 | 729 | ||||||
Interest cost | 3,953 | 3,923 | ||||||
Plan amendments | — | — | ||||||
Plan participants’ contributions | 2,838 | 2,774 | ||||||
Medicare Part D reimbursements | 1,010 | 545 | ||||||
SFAS 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 | $ | 62,600 | ||||
Change in plan assets: | ||||||||
Company contributions | $ | 4,373 | $ | 4,246 | ||||
Plan participants’ contributions | 2,838 | 2,774 | ||||||
Benefits 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 | $ | 2,138 | ||||
Net loss | 12,470 | 23,953 | ||||||
Ending Balance | $ | 14,145 | $ | 26,091 | ||||
2008 | 2007 | |||||||
Accumulated benefit obligation | $ | 54,777 | $ | 62,600 | ||||
Fair value of plan assets | — | — | ||||||
Funded status at end of measurement date | $ | (54,777 | ) | $ | (62,600 | ) | ||
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Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
Service cost | $ | 14,689 | $ | 14,265 | $ | 19,081 | $ | 724 | $ | 729 | $ | 666 | ||||||||||||
Interest cost | 35,733 | 33,183 | 32,153 | 3,953 | 3,923 | 3,990 | ||||||||||||||||||
Expected return on assets | (40,814 | ) | (37,601 | ) | (35,040 | ) | — | — | — | |||||||||||||||
Amortization of actuarial loss | 4,763 | 12,946 | 14,134 | 1,805 | 2,943 | 2,615 | ||||||||||||||||||
Amortization of prior service cost | (487 | ) | (487 | ) | (469 | ) | — | — | 266 | |||||||||||||||
Curtailment | — | — | 175 | — | — | — | ||||||||||||||||||
Amortization of transition obligation | — | — | — | 428 | 428 | 643 | ||||||||||||||||||
Net periodic benefit cost | $ | 13,884 | $ | 22,306 | $ | 30,034 | $ | 6,910 | $ | 8,023 | $ | 8,180 | ||||||||||||
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Discount 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 Benefits | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
Discount 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/A | |||||||||||||||
Rate of compensation increase | 4.50 | % | 4.25 | % | 4.25 | % | N/A | N/A | N/A | |||||||||||||||
2008 | 2007 | |||||||
Health 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 point | |||||||
increase | decrease | |||||||
Effect on total of service and interest cost | $ | 227 | $ | (203 | ) | |||
Effect on postretirement benefit obligation | 3,285 | (2,939 | ) | |||||
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Asset category | 2008 | 2007 | Target | |||||||||
U.S. equity securities | 41 | % | 49 | % | 50 | % | ||||||
International equity securities | 12 | % | 15 | % | 15 | % | ||||||
Fixed income securities and bonds | 47 | % | 36 | % | 35 | % | ||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
Other | Health | |||||||||||||||
Qualified | Non-qualified | Postretirement | Care Subsidy | |||||||||||||
Pension Plan | Pension Plans | Benefits | Receipts | |||||||||||||
2009 | $ | 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 | ) | |||||||||||
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The following table reflects the activity in membership shares during the three years ended December 31, 2008: |
Common | Preferred | |||||||||||||||||||
A | B | C | D | |||||||||||||||||
December 31, 2005 | 1,004 | 4,118 | 175 | 1,024 | 78,316 | |||||||||||||||
New members | 2 | 234 | — | 203 | — | |||||||||||||||
Redemptions | (47 | ) | (326 | ) | (8 | ) | (204 | ) | (8,632 | ) | ||||||||||
December 31, 2006 | 959 | 4,026 | 167 | 1,023 | 69,684 | |||||||||||||||
New members | 4 | 251 | 2 | 228 | — | |||||||||||||||
Redemptions | (54 | ) | (348 | ) | (6 | ) | (195 | ) | (7,268 | ) | ||||||||||
December 31, 2007 | 909 | 3,929 | 163 | 1,056 | 62,416 | |||||||||||||||
New members | 9 | 291 | 5 | 244 | — | |||||||||||||||
Redemptions | (46 | ) | (347 | ) | (4 | ) | (290 | ) | (5,391 | ) | ||||||||||
December 31, 2008 | 872 | 3,873 | 164 | 1,010 | 57,025 | |||||||||||||||
(Restated) | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Restructuring charges | $ | 1,760 | $ | 460 | $ | 1,482 | ||||||
Impairment charges | 1,133 | 3,510 | 39,031 | |||||||||
Total restructuring and impairment charges | $ | 2,893 | $ | 3,970 | $ | 40,513 | ||||||
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(Restated) | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Gain 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 | ) | |||
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Previously | Previously | |||||||||||||||||||||||
Reported | Effect of | As Adjusted | Reported | Effect of | As Restated | |||||||||||||||||||
2007 | Adjustments | 2007 | 2006 | Restatements | 2006 | |||||||||||||||||||
Cost of sales | $ | 434,168 | $ | 2,589 | $ | 436,757 | $ | 377,031 | 2,143 | 379,174 | ||||||||||||||
Selling, general and administrative | 52,737 | 1,328 | 54,065 | 31,442 | 947 | 32,389 | ||||||||||||||||||
Restructuring and impairment charges | — | — | — | 16,814 | 19,344 | 36,158 | ||||||||||||||||||
Interest expense | 14,898 | 727 | 15,625 | 17,210 | 698 | 17,908 | ||||||||||||||||||
Other (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 | ) | 248,248 | ||||||||||||||||
Depreciation and amortization | 8,078 | 1,420 | 9,498 | 8,739 | 1,839 | 10,578 | ||||||||||||||||||
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Total | ||||||||||||||||||||||||||||
Other/ | ||||||||||||||||||||||||||||
Dairy Foods | Feed | Seed | Agronomy | Layers | Eliminated | Consolidated | ||||||||||||||||||||||
For the year ended December 31, 2008: | ||||||||||||||||||||||||||||
Net sales | $ | 4,136,389 | $ | 3,857,411 | $ | 1,185,008 | $ | 2,335,274 | $ | 606,242 | $ | (81,065 | ) | $ | 12,039,259 | |||||||||||||
Cost of sales(1) | 3,922,833 | 3,570,914 | 1,068,795 | 2,059,411 | 535,073 | (73,116 | ) | 11,083,910 | ||||||||||||||||||||
Selling, general and administrative | 188,355 | 263,435 | 88,827 | 149,698 | 51,348 | 14,943 | 756,606 | |||||||||||||||||||||
Restructuring and impairment charges | 179 | 1,771 | — | — | 943 | — | 2,893 | |||||||||||||||||||||
Gain 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 | ) | 63,232 | |||||||||||||||||||
Other 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 | — | — | 16,128 | |||||||||||||||||||||
Earnings (loss) before income taxes | $ | 16,267 | $ | (441 | ) | $ | 33,372 | $ | 112,493 | $ | 29,860 | $ | (17,423 | ) | $ | 174,128 | ||||||||||||
For the year ended December 31, 2007: | ||||||||||||||||||||||||||||
Net sales | $ | 4,176,844 | $ | 3,061,591 | $ | 917,020 | $ | 287,373 | $ | 513,948 | $ | (31,881 | ) | $ | 8,924,895 | |||||||||||||
Cost of sales(1) | 3,899,398 | 2,761,697 | 799,108 | 293,015 | 436,757 | (29,669 | ) | 8,160,306 | ||||||||||||||||||||
Selling, general and administrative | 194,892 | 249,214 | 78,118 | 42,532 | 54,065 | 4,705 | 623,526 | |||||||||||||||||||||
Restructuring and impairment charges | 1,989 | 645 | 688 | — | 648 | — | 3,970 | |||||||||||||||||||||
Gain on insurance settlement | — | (5,941 | ) | — | — | — | — | (5,941 | ) | |||||||||||||||||||
Interest expense (income), net | 22,278 | 25,592 | (4,764 | ) | (3,318 | ) | 15,625 | (5,768 | ) | 49,645 | ||||||||||||||||||
Other (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 | — | — | — | — | 1,469 | |||||||||||||||||||||
Earnings (loss) before income taxes | $ | 87,420 | $ | 30,938 | $ | 43,910 | $ | 16,376 | $ | 19,943 | $ | (1,327 | ) | $ | 197,260 | |||||||||||||
For the year ended December 31, 2006 (Restated): | ||||||||||||||||||||||||||||
Net sales | $ | 3,241,251 | $ | 2,711,390 | $ | 755,976 | $ | — | $ | 398,394 | $ | (4,722 | ) | $ | 7,102,289 | |||||||||||||
Cost of sales(1) | 3,001,831 | 2,412,747 | 648,924 | — | 379,174 | 835 | 6,443,511 | |||||||||||||||||||||
Selling, general and administrative | 167,163 | 238,026 | 67,791 | 13,105 | 32,389 | (1,970 | ) | 516,504 | ||||||||||||||||||||
Restructuring and impairment charges | 4,290 | 65 | — | — | 36,158 | — | 40,513 | |||||||||||||||||||||
Interest expense (income), net | 31,915 | 25,220 | (638 | ) | (10,886 | ) | 17,908 | (4,461 | ) | 59,058 | ||||||||||||||||||
Other (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 | — | — | — | 1,449 | |||||||||||||||||||||
Earnings (loss) before income taxes | $ | 47,170 | $ | 36,712 | $ | 40,097 | $ | 12,157 | $ | (64,687 | ) | $ | 868 | $ | 72,317 | |||||||||||||
2008: | ||||||||||||||||||||||||||||
Total assets | $ | 879,494 | $ | 1,129,037 | $ | 955,753 | $ | 1,513,715 | $ | 269,732 | $ | 233,581 | $ | 4,981,312 | ||||||||||||||
Intersegment 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 | 91,809 | |||||||||||||||||||||
Capital expenditures | 84,805 | 54,320 | 3,047 | 4,459 | 18,267 | 6,446 | 171,344 | |||||||||||||||||||||
2007: | ||||||||||||||||||||||||||||
Total assets | $ | 865,046 | $ | 1,062,686 | $ | 676,510 | $ | 1,291,667 | $ | 271,713 | $ | 251,573 | $ | 4,419,195 | ||||||||||||||
Intersegment sales | 23,011 | 25,508 | — | 2,613 | — | (51,132 | ) | — | ||||||||||||||||||||
Depreciation and amortization | 26,342 | 27,756 | 2,430 | 8,459 | 9,498 | 11,075 | 85,560 | |||||||||||||||||||||
Capital expenditures | 18,004 | 42,189 | 2,012 | 290 | 5,143 | 23,423 | 91,061 | |||||||||||||||||||||
2006 (Restated): | ||||||||||||||||||||||||||||
Total assets | $ | 873,789 | $ | 956,105 | $ | 542,004 | $ | 172,870 | $ | 248,248 | $ | 207,346 | $ | 3,000,362 | ||||||||||||||
Intersegment sales | 5,753 | 18,147 | — | — | — | (23,900 | ) | — | ||||||||||||||||||||
Depreciation and amortization | 39,951 | 30,725 | 2,528 | 6,114 | 10,578 | 7,182 | 97,078 | |||||||||||||||||||||
Capital 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 | ) | $ | 52,250 | |||||||||||||
2007 | (48 | ) | (5,905 | ) | (2,737 | ) | — | (475 | ) | (1,120 | ) | (10,285 | ) | |||||||||||||||
2006 | (6,486 | ) | (2,257 | ) | (2,729 | ) | — | (118 | ) | 1,234 | (10,356 | ) |
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First | Second | Third | Fourth | |||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Full Year | ||||||||||||||||
2008 | ||||||||||||||||||||
Net sales | $ | 3,256,999 | $ | 3,327,865 | $ | 2,783,930 | $ | 2,670,465 | $ | 12,039,259 | ||||||||||
Gross profit | 250,707 | 311,488 | 236,600 | 156,554 | 955,349 | |||||||||||||||
Net earnings | 61,283 | 102,785 | 28,562 | (33,010 | ) | 159,620 |
First | Second | Third | Fourth | |||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Full Year | ||||||||||||||||
2007 | ||||||||||||||||||||
Net sales | $ | 2,182,283 | $ | 2,022,016 | $ | 2,134,573 | $ | 2,586,023 | $ | 8,924,895 | ||||||||||
Gross profit | 217,550 | 189,416 | 160,344 | 197,279 | 764,589 | |||||||||||||||
Net earnings | 52,631 | 79,497 | 3,089 | 25,712 | 160,929 |
2008 | 2007 | 2006 | ||||||||||
Sales | $ | 1,082,721 | $ | 705,606 | $ | 406,627 | ||||||
Purchases | 141,830 | 127,433 | 92,372 | |||||||||
Services provided | 4,102 | 3,055 | 17,650 |
2008 | 2007 | |||||||
Notes receivable | $ | 15,712 | $ | 12,656 | ||||
Notes payable | 20,000 | — | ||||||
Accounts receivable | 60,735 | 51,013 | ||||||
Accounts payable | 22,387 | 23,707 |
Balance at | ||||||||||||||||||||||||
Beginning | Charges to | Balance at | ||||||||||||||||||||||
Description | of Year | Expense(b) | Recoveries | Charge-offs | Other(a) | End of Year | ||||||||||||||||||
Year ended December 31, 2008 | $ | 14,125 | $ | 6,850 | $ | 956 | $ | (4,641 | ) | $ | 2,577 | $ | 19,867 | |||||||||||
Year ended December 31, 2007 | 10,090 | 3,264 | 2,036 | (2,717 | ) | 1,452 | 14,125 | |||||||||||||||||
Year 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. |
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December 31, 2008
Land | ||||||||||||||||||||
O’Lakes, Inc. | ||||||||||||||||||||
Parent | Consolidated | Non-Guarantor | ||||||||||||||||||
Company | Guarantors | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 4,985 | $ | 7,028 | $ | 18,807 | $ | — | $ | 30,820 | ||||||||||
Receivables, net | 130,313 | 580,897 | 941,107 | (548,056 | ) | 1,104,261 | ||||||||||||||
Intercompany receivables | 238,447 | 9,633 | 1,240 | (249,320 | ) | — | ||||||||||||||
Inventories | 377,150 | 606,765 | 100,063 | — | 1,083,978 | |||||||||||||||
Prepaid assets | 686,331 | 410,295 | 4,379 | — | 1,101,005 | |||||||||||||||
Other current assets | 105,190 | 16,715 | 1,599 | — | 123,504 | |||||||||||||||
Total current assets | 1,542,416 | 1,631,333 | 1,067,195 | (797,376 | ) | 3,443,568 | ||||||||||||||
Investments | 1,058,744 | 57,027 | 16,517 | (817,801 | ) | 314,487 | ||||||||||||||
Property, plant and equipment, net | 252,638 | 294,212 | 111,411 | — | 658,261 | |||||||||||||||
Goodwill, net | 191,936 | 64,532 | 20,708 | — | 277,176 | |||||||||||||||
Other intangibles, net | 2,113 | 111,763 | 7,106 | — | 120,982 | |||||||||||||||
Other assets | 71,684 | 40,553 | 58,485 | (3,884 | ) | 166,838 | ||||||||||||||
Total assets | $ | 3,119,531 | $ | 2,199,420 | $ | 1,281,422 | $ | (1,619,061 | ) | $ | 4,981,312 | |||||||||
LIABILITIES AND EQUITIES | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Notes and short-term obligations | $ | 19,998 | $ | 2,244 | $ | 912,595 | $ | (525,467 | ) | $ | 409,370 | |||||||||
Current portion of long-term debt | 281 | 50 | 2,533 | — | 2,864 | |||||||||||||||
Accounts payable | 418,156 | 739,547 | 41,247 | (22,955 | ) | 1,175,995 | ||||||||||||||
Intercompany payables | — | 246,342 | 2,978 | (249,320 | ) | — | ||||||||||||||
Customer advances | 643,180 | 401,417 | 1,108 | — | 1,045,705 | |||||||||||||||
Accrued liabilities | 185,234 | 198,440 | 43,338 | (3,518 | ) | 423,494 | ||||||||||||||
Patronage refunds and other member equities payable | 37,751 | — | — | — | 37,751 | |||||||||||||||
Total current liabilities | 1,304,600 | 1,588,040 | 1,003,799 | (801,260 | ) | 3,095,179 | ||||||||||||||
Long-term debt | 512,785 | 71 | 19,099 | — | 531,955 | |||||||||||||||
Employee benefits and other liabilities | 325,294 | 29,047 | 4,063 | — | 358,404 | |||||||||||||||
Minority interests | — | (11 | ) | 18,933 | — | 18,922 | ||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Equities: | ||||||||||||||||||||
Capital stock | 1,611 | (34 | ) | 2,935 | (2,901 | ) | 1,611 | |||||||||||||
Additional paid-in capital | — | 200,643 | 73,885 | (274,528 | ) | — | ||||||||||||||
Member equities | 947,141 | — | — | — | 947,141 | |||||||||||||||
Accumulated other comprehensive loss | (150,277 | ) | (15 | ) | (31 | ) | 46 | (150,277 | ) | |||||||||||
Retained earnings | 178,377 | 381,679 | 158,739 | (540,418 | ) | 178,377 | ||||||||||||||
Total equities | 976,852 | 582,273 | 235,528 | (817,801 | ) | 976,852 | ||||||||||||||
Total liabilities and equities | $ | 3,119,531 | $ | 2,199,420 | $ | 1,281,422 | $ | (1,619,061 | ) | $ | 4,981,312 | |||||||||
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For the Year Ended December 31, 2008
Land | ||||||||||||||||||||
O’Lakes, | ||||||||||||||||||||
Inc. Parent | Consolidated | Non-Guarantor | ||||||||||||||||||
Company | Guarantors | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales | $ | 5,194,546 | $ | 5,876,261 | $ | 968,452 | $ | — | $ | 12,039,259 | ||||||||||
Cost of sales | 4,872,294 | 5,378,719 | 832,897 | — | 11,083,910 | |||||||||||||||
Gross profit | 322,252 | 497,542 | 135,555 | — | 955,349 | |||||||||||||||
Selling, general and administrative | 297,159 | 381,217 | 78,230 | — | 756,606 | |||||||||||||||
Restructuring and impairment charges | 179 | 1,720 | 994 | — | 2,893 | |||||||||||||||
Gain on insurance settlement | — | (6,606 | ) | (4,032 | ) | — | (10,638 | ) | ||||||||||||
Earnings from operations | 24,914 | 121,211 | 60,363 | — | 206,488 | |||||||||||||||
Interest expense (income), net | 76,945 | 1,231 | (14,944 | ) | — | 63,232 | ||||||||||||||
Other (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 | — | 16,128 | ||||||||||||||
Earnings before income taxes | 170,127 | 123,627 | 78,632 | (198,258 | ) | 174,128 | ||||||||||||||
Income tax expense (benefit) | 10,507 | (206 | ) | 4,207 | — | 14,508 | ||||||||||||||
Net earnings | $ | 159,620 | $ | 123,833 | $ | 74,425 | $ | (198,258 | ) | $ | 159,620 | |||||||||
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For the Year Ended December 31, 2008
Land | ||||||||||||||||||||
O’Lakes, | ||||||||||||||||||||
Inc. Parent | Consolidated | Non-Guarantor | ||||||||||||||||||
Company | Guarantors | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net earnings | $ | 159,620 | $ | 123,833 | $ | 74,425 | $ | (198,258 | ) | $ | 159,620 | |||||||||
Adjustments to reconcile net earnings to net cash provided (used) by operating activities: | ||||||||||||||||||||
Depreciation and amortization | 38,024 | 43,250 | 10,535 | — | 91,809 | |||||||||||||||
Amortization of deferred financing costs | 2,293 | — | 2,150 | — | 4,443 | |||||||||||||||
Gain on extinguishment of debt | (379 | ) | — | — | — | (379 | ) | |||||||||||||
Bad debt expense | 972 | 3,321 | 2,557 | — | 6,850 | |||||||||||||||
Proceeds from patronage revolvement received | 3,330 | 4,160 | — | — | 7,490 | |||||||||||||||
Non-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 | ) | — | 17,851 | ||||||||||||||
Restructuring 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 | — | 45,142 | |||||||||||||||
Minority interests | — | (11 | ) | 16,139 | — | 16,128 | ||||||||||||||
Other | (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 | ) | 19,171 | |||||||||||||
Customer advances | 129,111 | (9,453 | ) | (18,366 | ) | — | 101,292 | |||||||||||||
Accrued liabilities | 10,776 | 39,005 | 8,458 | 276 | 58,515 | |||||||||||||||
Net cash provided (used) by operating activities | 190,181 | 43,202 | (2,473 | ) | (225,963 | ) | 4,947 | |||||||||||||
Cash 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 | — | — | 1,678 | |||||||||||||||
Proceeds from sale of investments | 19,464 | 1,749 | — | — | 21,213 | |||||||||||||||
Proceeds from foreign currency exchange contracts on sale of investment | 3,850 | — | — | — | 3,850 | |||||||||||||||
Proceeds from sale of property, plant and equipment | 4,017 | 1,963 | 235 | — | 6,215 | |||||||||||||||
Insurance proceeds for replacement assets | 332 | — | 4,571 | — | 4,903 | |||||||||||||||
Change in notes receivable | 1,483 | (339 | ) | (12,740 | ) | — | (11,596 | ) | ||||||||||||
Other | (166 | ) | — | 3,216 | — | 3,050 | ||||||||||||||
Net 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 | 266,829 | ||||||||||||||
Proceeds from issuance of long-term debt | — | — | 496 | — | 496 | |||||||||||||||
Principal 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 | 111,241 | ||||||||||||
Net 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 | — | 116,839 | |||||||||||||||
Cash and cash equivalents at end of year | $ | 4,985 | $ | 7,028 | $ | 18,807 | $ | — | $ | 30,820 | ||||||||||
-131-
Table of Contents
December 31, 2007
Land | ||||||||||||||||||||
O’Lakes, Inc. | ||||||||||||||||||||
Parent | Consolidated | Non-Guarantor | ||||||||||||||||||
Company | Guarantors | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 12,411 | $ | 17,036 | $ | 87,392 | $ | — | $ | 116,839 | ||||||||||
Receivables, net | 352,797 | 544,941 | 872,799 | (763,606 | ) | 1,006,931 | ||||||||||||||
Intercompany receivables | — | 146,951 | — | (146,951 | ) | — | ||||||||||||||
Inventories | 390,236 | 527,014 | 47,265 | — | 964,515 | |||||||||||||||
Prepaid assets | 454,073 | 398,820 | 4,364 | — | 857,257 | |||||||||||||||
Other current assets | 55,781 | 19,637 | 939 | — | 76,357 | |||||||||||||||
Total current assets | 1,265,298 | 1,654,399 | 1,012,759 | (910,557 | ) | 3,021,899 | ||||||||||||||
Investments | 1,339,386 | 48,312 | 15,528 | (1,099,213 | ) | 304,013 | ||||||||||||||
Property, plant and equipment, net | 197,177 | 270,044 | 98,072 | — | 565,293 | |||||||||||||||
Goodwill, net | 211,900 | 47,632 | 21,410 | — | 280,942 | |||||||||||||||
Other intangibles, net | 3,587 | 113,440 | 7,977 | — | 125,004 | |||||||||||||||
Other assets | 35,887 | 35,927 | 53,965 | (3,735 | ) | 122,044 | ||||||||||||||
Total assets | $ | 3,053,235 | $ | 2,169,754 | $ | 1,209,711 | $ | (2,013,505 | ) | $ | 4,419,195 | |||||||||
LIABILITIES AND EQUITIES | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Notes and short-term obligations | $ | — | $ | 3,815 | $ | 879,785 | $ | (751,430 | ) | $ | 132,170 | |||||||||
Current portion of long-term debt | — | 396 | 2,907 | (221 | ) | 3,082 | ||||||||||||||
Accounts payable | 498,081 | 629,981 | 34,408 | (12,117 | ) | 1,150,353 | ||||||||||||||
Intercompany payables | 90,209 | 55,855 | 887 | (146,951 | ) | — | ||||||||||||||
Customer advances | 514,069 | 410,870 | 1,301 | — | 926,240 | |||||||||||||||
Accrued liabilities | 159,693 | 152,233 | 33,289 | (3,794 | ) | 341,421 | ||||||||||||||
Patronage refunds and other member equities payable | 28,065 | — | — | — | 28,065 | |||||||||||||||
Total current liabilities | 1,290,117 | 1,253,150 | 952,577 | (914,513 | ) | 2,581,331 | ||||||||||||||
Long-term debt | 556,844 | 142 | 29,702 | 221 | 586,909 | |||||||||||||||
Employee benefits and other liabilities | 191,938 | 25,002 | 13,504 | — | 230,444 | |||||||||||||||
Minority interests | — | 1,558 | 4,617 | — | 6,175 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Equities: | ||||||||||||||||||||
Capital stock | 1,701 | — | 2,909 | (2,909 | ) | 1,701 | ||||||||||||||
Additional paid-in capital | — | 639,343 | 125,260 | (764,603 | ) | — | ||||||||||||||
Member equities | 937,126 | — | — | — | 937,126 | |||||||||||||||
Accumulated other comprehensive (loss) earnings | (61,931 | ) | (189 | ) | 476 | (287 | ) | (61,931 | ) | |||||||||||
Retained earnings | 137,440 | 250,748 | 80,666 | (331,414 | ) | 137,440 | ||||||||||||||
Total equities | 1,014,336 | 889,902 | 209,311 | (1,099,213 | ) | 1,014,336 | ||||||||||||||
Total liabilities and equities | $ | 3,053,235 | $ | 2,169,754 | $ | 1,209,711 | $ | (2,013,505 | ) | $ | 4,419,195 | |||||||||
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Table of Contents
For the Year Ended December 31, 2007
Land | ||||||||||||||||||||
O’Lakes, | ||||||||||||||||||||
Inc. Parent | Consolidated | Non-Guarantor | ||||||||||||||||||
Company | Guarantors | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales | $ | 4,804,249 | $ | 3,507,453 | $ | 613,193 | $ | — | $ | 8,924,895 | ||||||||||
Cost of sales | 4,440,745 | 3,190,183 | 529,378 | — | 8,160,306 | |||||||||||||||
Gross profit | 363,504 | 317,270 | 83,815 | — | 764,589 | |||||||||||||||
Selling, general and administrative | 302,539 | 288,266 | 32,721 | — | 623,526 | |||||||||||||||
Restructuring and impairment charges | 2,677 | 595 | 698 | — | 3,970 | |||||||||||||||
Gain on insurance settlement | — | (5,941 | ) | — | — | (5,941 | ) | |||||||||||||
Earnings from operations | 58,288 | 34,350 | 50,396 | — | 143,034 | |||||||||||||||
Interest expense (income), net | 54,844 | 1,592 | (6,791 | ) | — | 49,645 | ||||||||||||||
Other 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 | — | 1,469 | |||||||||||||||
Earnings before income taxes | 192,994 | 63,631 | 73,073 | (132,438 | ) | 197,260 | ||||||||||||||
Income tax expense | 32,065 | 502 | 3,764 | — | 36,331 | |||||||||||||||
Net earnings | $ | 160,929 | $ | 63,129 | $ | 69,309 | $ | (132,438 | ) | $ | 160,929 | |||||||||
-133-
Table of Contents
For the Year Ended December 31, 2007
Land | ||||||||||||||||||||
O’Lakes, | ||||||||||||||||||||
Inc. Parent | Consolidated | Non-Guarantor | ||||||||||||||||||
Company | Guarantors | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net earnings | $ | 160,929 | $ | 63,129 | $ | 69,309 | $ | (132,438 | ) | $ | 160,929 | |||||||||
Adjustments to reconcile net earnings to net cash provided (used) by operating activities: | ||||||||||||||||||||
Depreciation and amortization | 41,708 | 33,490 | 10,362 | — | 85,560 | |||||||||||||||
Amortization of deferred financing costs | 1,819 | 288 | 874 | — | 2,981 | |||||||||||||||
Bad debt expense | 20,834 | 1,736 | 248 | — | 22,818 | |||||||||||||||
Proceeds from patronage revolvement received | 6,701 | 5 | — | — | 6,706 | |||||||||||||||
Non-cash patronage income | (2,410 | ) | (133 | ) | — | — | (2,543 | ) | ||||||||||||
Insurance recovery — business interruption | — | 4,551 | — | — | 4,551 | |||||||||||||||
Deferred 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 | ) | — | 4,156 | ||||||||||||||
Restructuring and impairment charges | 2,677 | 595 | 698 | — | 3,970 | |||||||||||||||
Gain 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 | — | 33,699 | |||||||||||||||
Minority interests | — | — | 1,469 | — | 1,469 | |||||||||||||||
Other | (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 | ) | 586,712 | ||||||||||||||
Customer advances | 130,012 | 379,008 | (2,296 | ) | — | 506,724 | ||||||||||||||
Accrued liabilities | (19,686 | ) | 88,088 | 8,743 | (1,160 | ) | 75,985 | |||||||||||||
Net cash provided (used) by operating activities | 88,859 | 231,907 | (324,643 | ) | 334,836 | 330,959 | ||||||||||||||
Cash 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 | — | — | — | 25,000 | |||||||||||||||
Net settlement on repositioning investment in joint venture | 77,550 | (165,425 | ) | — | — | (87,875 | ) | |||||||||||||
Net proceeds from divestitures of businesses | 211,851 | — | 250 | — | 212,101 | |||||||||||||||
Proceeds from sale of investments | 475 | — | 151 | — | 626 | |||||||||||||||
Proceeds from sale of property, plant and equipment | 3,568 | 3,526 | 3,408 | — | 10,502 | |||||||||||||||
Insurance proceeds for replacement assets | — | 8,635 | — | — | 8,635 | |||||||||||||||
Change 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 | ) | 75,399 | |||||||||||||
Proceeds from issuance of long-term debt | 210 | 1,830 | 3,750 | — | 5,790 | |||||||||||||||
Principal 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 | — | 37,132 | |||||||||||||||
Cash and cash equivalents at beginning of year | 8,976 | 15,613 | 55,118 | — | 79,707 | |||||||||||||||
Cash and cash equivalents at end of year | $ | 12,411 | $ | 17,036 | $ | 87,392 | $ | — | $ | 116,839 | ||||||||||
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Table of Contents
For the Year Ended December 31, 2006
(Restated) | ||||||||||||||||||||
Land | ||||||||||||||||||||
O’Lakes, | (Restated) | |||||||||||||||||||
Inc. Parent | Consolidated | Non-Guarantor | (Restated) | |||||||||||||||||
Company | Guarantors | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Net sales | $ | 3,269,031 | $ | 3,336,244 | $ | 497,014 | $ | — | $ | 7,102,289 | ||||||||||
Cost of sales | 2,958,004 | 3,015,590 | 469,917 | — | 6,443,511 | |||||||||||||||
Gross profit | 311,027 | 320,654 | 27,097 | — | 658,778 | |||||||||||||||
Selling, general and administrative | 227,057 | 254,241 | 35,206 | — | 516,504 | |||||||||||||||
Restructuring and impairment charges | 4,291 | 64 | 36,158 | — | 40,513 | |||||||||||||||
Earnings (loss) from operations | 79,679 | 66,349 | (44,267 | ) | — | 101,761 | ||||||||||||||
Interest expense (income), net | 46,140 | 13,391 | (473 | ) | — | 59,058 | ||||||||||||||
Other 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 | — | 1,449 | ||||||||||||||
Earnings (loss) before income taxes | 73,630 | 55,532 | (42,022 | ) | (14,823 | ) | 72,317 | |||||||||||||
Income tax expense (benefit) | 4,257 | 1,562 | (2,875 | ) | — | 2,944 | ||||||||||||||
Net earnings (loss) | $ | 69,373 | $ | 53,970 | $ | (39,147 | ) | $ | (14,823 | ) | $ | 69,373 | ||||||||
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Table of Contents
For the Year Ended December 31, 2006
(Restated) | ||||||||||||||||||||
Land | ||||||||||||||||||||
O’Lakes, | (Restated) | |||||||||||||||||||
Inc. Parent | Consolidated | Non-Guarantor | (Restated) | |||||||||||||||||
Company | Guarantors | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net earnings (loss) | $ | 69,373 | $ | 53,970 | $ | (39,147 | ) | $ | (14,823 | ) | $ | 69,373 | ||||||||
Adjustments to reconcile net earnings to net cash provided (used) by operating activities: | ||||||||||||||||||||
Depreciation and amortization | 40,196 | 44,897 | 11,985 | — | 97,078 | |||||||||||||||
Amortization of deferred financing costs | 2,109 | 79 | 736 | — | 2,924 | |||||||||||||||
Bad debt (recovery) expense | (588 | ) | 2,025 | 269 | — | 1,706 | ||||||||||||||
Proceeds from patronage revolvement received | 8,882 | 281 | — | — | 9,163 | |||||||||||||||
Non-cash patronage income | (1,765 | ) | (62 | ) | — | — | (1,827 | ) | ||||||||||||
Deferred income tax expense (benefit) | 13,260 | — | (4,722 | ) | — | 8,538 | ||||||||||||||
Decrease (increase) in other assets | 4,984 | (2,044 | ) | (47 | ) | — | 2,893 | |||||||||||||
Increase (decrease) in other liabilities | 5,345 | (64 | ) | (13 | ) | — | 5,268 | |||||||||||||
Restructuring and impairment charges | 4,291 | 64 | 36,158 | — | 40,513 | |||||||||||||||
Gain 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 | — | 4,736 | |||||||||||||||
Minority interests | (62 | ) | — | 1,511 | — | 1,449 | ||||||||||||||
Other | (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 | 38,829 | ||||||||||||
Inventories | 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 | — | 23,643 | ||||||||||||||
Accrued liabilities | 42,047 | 14,207 | 7,231 | (3,108 | ) | 60,377 | ||||||||||||||
Net cash provided (used) by operating activities | 40,333 | 40,905 | (346,850 | ) | 465,515 | 199,903 | ||||||||||||||
Cash 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 | — | 42,466 | |||||||||||||||
Proceeds from sale of investments | 8,372 | 902 | — | — | 9,274 | |||||||||||||||
Proceeds from sale of property, plant and equipment | 358 | 1,193 | 203 | — | 1,754 | |||||||||||||||
Change in notes receivable | 21,802 | 885 | (2,149 | ) | (4,757 | ) | 15,781 | |||||||||||||
Other | 1,184 | 3,901 | 2,098 | — | 7,183 | |||||||||||||||
Net 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 | — | 13,710 | ||||||||||||||
Principal 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 | ) | 4,933 | |||||||||||||
Net 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 | — | 179,704 | |||||||||||||||
Cash and cash equivalents at end of year | $ | 8,976 | $ | 15,613 | $ | 55,118 | $ | — | $ | 79,707 | ||||||||||
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(Unaudited) | (Unaudited) | |||||||
November 30, | August 31, | |||||||
2008 | 2008 | |||||||
($ in thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 17,925 | $ | 34,536 | ||||
Trade receivables, net of allowance for doubtful accounts of $1,016 and $1,194, respectively | 524 | 2,481 | ||||||
Rebates receivable | — | 1,601 | ||||||
Other receivables | 432 | 574 | ||||||
Receivable from Land O’Lakes, Inc | 20,337 | 662 | ||||||
Receivable from CHS, Inc | 257 | 185 | ||||||
Receivable from Joint Venture | — | 3,780 | ||||||
Inventories | 2,687 | 1,774 | ||||||
Prepaid expenses | 20 | 20 | ||||||
Assets held for sale | 410,629 | 433,525 | ||||||
Total current assets | 452,811 | 479,138 | ||||||
Property, plant and equipment: | ||||||||
Land and land improvements | 241 | 241 | ||||||
Buildings | 2,373 | 2,504 | ||||||
Machinery and equipment | 39,566 | 40,198 | ||||||
Construction in progress | 4 | — | ||||||
Total property, plant and equipment | 42,184 | 42,943 | ||||||
Less accumulated depreciation | (33,954 | ) | (32,259 | ) | ||||
Net property, plant and equipment | 8,230 | 10,684 | ||||||
Other assets | 15,268 | 11,874 | ||||||
Total assets | $ | 476,309 | $ | 501,696 | ||||
LIABILITIES AND MEMBERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Cash overdraft | $ | 5,303 | $ | 4,365 | ||||
Accounts payable | 444 | 13,749 | ||||||
Customer prepayments | 33 | 631 | ||||||
Accrued expenses | 26,783 | 33,306 | ||||||
Other current liabilities | 1,156 | 1,280 | ||||||
Liabilities held for sale | 72,194 | 71,014 | ||||||
Total current liabilities | 105,913 | 124,345 | ||||||
Other noncurrent liabilities | 11,945 | 12,221 | ||||||
Members’ equity: | ||||||||
Contributed capital | 271,858 | 271,858 | ||||||
Retained earnings | 85,835 | 92,514 | ||||||
Accumulated other comprehensive loss | 758 | 758 | ||||||
Total members’ equity | 358,451 | 365,130 | ||||||
Total liabilities and members’ equity | $ | 476,309 | $ | 501,696 | ||||
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Three Months Ended | ||||||||
November 30, | ||||||||
2008 | 2007 | |||||||
($ in thousands) | ||||||||
(Unaudited) | ||||||||
Net sales | $ | 96,378 | $ | 210,590 | ||||
Cost of sales | 77,009 | 141,856 | ||||||
Gross margin | 19,369 | 68,734 | ||||||
Selling, general, and administrative expense | 27,725 | 47,616 | ||||||
Restructuring and impairment charges | 460 | 5,559 | ||||||
Gain on sale of assets | (1,224 | ) | (1,683 | ) | ||||
Loss (earnings) from operations | (7,592 | ) | 17,242 | |||||
Other expense | — | 2,669 | ||||||
Interest expense, net | (924 | ) | 2,496 | |||||
Minority Interests | 11 | 1,872 | ||||||
Net (loss) earnings | $ | (6,679 | ) | $ | 10,205 | |||
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Three Months Ended | ||||||||
November 30, | ||||||||
2008 | 2007 | |||||||
($ in thousands) | ||||||||
(Unaudited) | ||||||||
Cash flows from operating activities: | ||||||||
Net (loss) earnings | $ | (6,679 | ) | $ | 10,205 | |||
Adjustments to reconcile net (loss) earnings to net cash used by operating activities: | ||||||||
Depreciation and amortization | 3,827 | 4,246 | ||||||
Restructuring and impairment charges | 460 | 5,559 | ||||||
Bad debt expense | 274 | 600 | ||||||
Loss on extinguishment of debt | — | 2,669 | ||||||
Gain on sale of assets | (610 | ) | (440 | ) | ||||
Minority interests | 11 | 1,872 | ||||||
Changes in other non-current assets and liabilities | (3,678 | ) | 446 | |||||
Changes in current assets and liabilities: | ||||||||
Trade receivables | 1,683 | 18,198 | ||||||
Receivables/payables from related parties | (15,951 | ) | (22,887 | ) | ||||
Rebates receivable | 1,601 | (40,637 | ) | |||||
Other receivables | 142 | 3,929 | ||||||
Inventories | (913 | ) | (18,306 | ) | ||||
Vendor prepayments | — | (18,861 | ) | |||||
Accounts payable and customer prepayments | (13,903 | ) | (368,142 | ) | ||||
Accrued competitive allowances | — | 5,461 | ||||||
Accrued expenses | (7,695 | ) | (14,512 | ) | ||||
Assets held for sale | 22,896 | 7,631 | ||||||
Liabilities held for sale | 1,180 | (54,255 | ) | |||||
Other current assets and liabilities | (141 | ) | 1,875 | |||||
Net 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 | 484 | ||||||
Net cash used by investing activities | (53 | ) | (1,253 | ) | ||||
Cash flows from financing activities: | ||||||||
Change in short-term debt | — | 19,316 | ||||||
Payments for debt extinguishment costs | — | (2,669 | ) | |||||
Increase (decrease) in cash overdrafts | 938 | (11,367 | ) | |||||
Capital contributions by members | — | 463,899 | ||||||
Net cash provided by financing activities | 938 | 469,179 | ||||||
Net change in cash | (16,611 | ) | (7,423 | ) | ||||
Cash at beginning of period | 34,536 | 7,423 | ||||||
Cash at end of period | $ | 17,925 | $ | — | ||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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(Unaudited) | ||||
2008 | ||||
ASSETS | ||||
Current assets: | ||||
Cash | $ | 34,536 | ||
Trade receivables, net of allowance for doubtful accounts of $1,194 in 2008 | 2,481 | |||
Rebates receivable | 1,601 | |||
Other receivables | 574 | |||
Receivable from Land O’ Lakes, Inc | 662 | |||
Receivable from CHS, Inc. | 185 | |||
Receivable from Joint Venture | 3,780 | |||
Inventories | 1,774 | |||
Prepaid expenses | 20 | |||
Assets held for sale | 433,525 | |||
Total current assets | 479,138 | |||
Property, plant and equipment: | ||||
Land and land improvements | 241 | |||
Buildings | 2,504 | |||
Machinery and equipment | 40,198 | |||
Total property, plant and equipment | 42,943 | |||
Less accumulated depreciation | (32,259 | ) | ||
Net property, plant and equipment | 10,684 | |||
Other assets | 11,874 | |||
Total assets | $ | 501,696 | ||
LIABILITIES AND MEMBERS’ EQUITY | ||||
Current liabilities: | ||||
Cash overdraft | $ | 4,365 | ||
Accounts payable | 13,749 | |||
Customer prepayments | 631 | |||
Accrued expenses | 33,306 | |||
Other current liabilities | 1,280 | |||
Liabilities held for sale | 71,014 | |||
Total current liabilities | 124,345 | |||
Other noncurrent liabilities | 12,221 | |||
Members’ equity: | ||||
Contributed capital | 271,858 | |||
Retained earnings | 92,514 | |||
Accumulated other comprehensive income | 758 | |||
Total members’ equity | 365,130 | |||
Total liabilities and members’ equity | $ | 501,696 | ||
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(Unaudited) | ||||
2008 | ||||
Net sales | $ | 1,070,892 | ||
Cost of sales | 825,605 | |||
Gross margin | 245,287 | |||
Selling, general and administrative expense | 161,959 | |||
Restructuring and impairment charges | 11,738 | |||
Gain on sale of assets | (3,434 | ) | ||
Earnings from operations | 75,024 | |||
Other expense | 2,669 | |||
Minority interests | (590 | ) | ||
Interest expense, net | 2,045 | |||
Net earnings | $ | 70,900 | ||
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(Unaudited) | ||||
2008 | ||||
Cash flows from operating activities: | ||||
Net earnings | $ | 70,900 | ||
Adjustments to reconcile net earnings to net cash used in operating activities: | ||||
Depreciation and amortization | 17,463 | |||
Non-cash portion of restructuring and impairment charges | 11,738 | |||
Loss on extinguishment of debt | 2,669 | |||
Bad debt expense (benefit) | 4,327 | |||
Minority interests | (590 | ) | ||
Gain on disposal of property, plant and equipment | (3,434 | ) | ||
Changes in other non-current assets and liabilities | 2,292 | |||
Changes in current assets and liabilities: | ||||
Trade receivables | 191,351 | |||
Receivables/payables from related parties | 4,203 | |||
Rebates receivable | (35,266 | ) | ||
Other receivables | 1,897 | |||
Inventories | (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 | 10,351 | |||
Proceeds from minority interest partners | (1,500 | ) | ||
Net cash provided by investing activities | 4,297 | |||
Cash flows from financing activities: | ||||
Proceeds from issuance of short-term debt | 1,880 | |||
Proceeds 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 | 510,000 | |||
Assets and liabilities held for sale | (3,161 | ) | ||
Net cash provided by financing activities | 447,966 | |||
Net change in cash | 27,113 | |||
Cash at beginning of period | 7,423 | |||
Cash at end of period | $ | 34,536 | ||
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Accumulated | ||||||||||||||||||||
other | Total | |||||||||||||||||||
Contributed | Retained | comprehensive | members’ | Comprehensive | ||||||||||||||||
capital | earnings | (loss) income | equity | income | ||||||||||||||||
Balance at August 31, 2007 | $ | 159,089 | $ | 61,614 | $ | (5,107 | ) | $ | 215,596 | |||||||||||
Net earnings | — | 70,900 | — | 70,900 | $ | 70,900 | ||||||||||||||
Minimum pension liability adjustment | — | — | 5,865 | 5,865 | 5,865 | |||||||||||||||
Comprehensive income | $ | 76,765 | ||||||||||||||||||
Contributed Capital | 711,798 | 711,798 | ||||||||||||||||||
Distributions 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 | ||||||||||||
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NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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Table of Contents
NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Thousands) | ||||||||||||
Before | After | |||||||||||
Application | Application | |||||||||||
Of Statement 158 | Adjustments | Of Statement 158 | ||||||||||
Other noncurrent assets | $ | 10,734 | $ | (5,492 | ) | $ | 5,242 | |||||
Other noncurrent liabilities | (8,555 | ) | 1,332 | (7,223 | ) | |||||||
Accumulated other comprehensive loss | 947 | 4,160 | 5,107 |
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NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Thousands) | ||||||||
Pension | Postretirement | |||||||
Benefits | Benefits | |||||||
2008 | 2008 | |||||||
Benefit 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 | Postretirement | |||||||
Benefits | Benefits | |||||||
2008 | 2008 | |||||||
Discount rate | 7.00 | % | 7.00 | % | ||||
Rate of compensation increase | 3.00 | % | N/A |
Pension | Postretirement | |||||||
Benefits | Benefits | |||||||
2008 | 2008 | |||||||
Discount rate | 6.25 | % | 6.25 | % | ||||
Expected long-term rate of return on plan assets | 8.50 | % | N/A | |||||
Rate of compensation increase | 2.50 | % | N/A |
(In Thousands) | ||||||||
Pension | Postretirement | |||||||
Benefits | Benefits | |||||||
2008 | 2008 | |||||||
Benefit cost | $ | (75 | ) | $ | 449 | |||
Employer contribution | — | 492 | ||||||
Plan participants’ contributions | — | 353 | ||||||
Benefits paid | 3,405 | 845 |
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NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Plan Assets at August 31 | ||||
Asset category | 2008 | |||
Equity securities | 54.1 | % | ||
Debt securities | 32.7 | % | ||
Real Estate | 12.6 | % | ||
Other | 0.6 | % | ||
Total | 100.0 | % | ||
Expected Benefit | ||||
Payments | ||||
($ in thousands) | ||||
2009 | $ | 344 | ||
2010 | 338 | |||
2011 | 314 | |||
2012 | 317 | |||
2013 | 315 | |||
2014-2018 | 1,597 | |||
Total | $ | 3,225 | ||
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NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2008 | ||||
($ in thousands) | ||||
Land O’Lakes, Inc. | $ | 9,880 | ||
CHS Inc. | 633 |
2008 | ||||
($ in thousands) | ||||
Land O’Lakes, Inc. | $ | 84 | ||
CHS Inc. | 5,837 |
Year ending August 31, | ($ in thousands) | |||
2009 | $ | 7,267 | ||
2010 | 5,267 | |||
2011 | 2,687 | |||
2012 | 1,003 | |||
2013 | 426 | |||
2014 and thereafter | 109 |
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NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
($ in thousands) | ||||
2008 | ||||
Restructuring charge | $ | 10,989 | ||
Impairment charges | 749 | |||
Total | $ | 11,738 | ||
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NOTES TO THE AUGUST 31, 2008 CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
($ in thousands) 2008 | ||||
Cash | $ | — | ||
Net trade receivables | 158,130 | |||
Rebates receivables | 35,939 | |||
Other receivables | 4,408 | |||
Related Party Receivable | 7,509 | |||
Inventories | 178,727 | |||
Vendor prepayments | 30,359 | |||
Prepaid expenses | 65 | |||
Net property, plant and equipment | 17,800 | |||
Other assets | 588 | |||
Assets held for sale | $ | 433,525 | ||
($ in thousands) 2008 | ||||
Cash 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 | ) | |
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Agriliance LLC:
/s/ KPMG LLP |
April 15, 2008
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2007 | 2006 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 7,423 | $ | 9,552 | ||||
Trade receivables, net of allowance for doubtful accounts of $3,205 and $14,664 in 2007 and 2006, respectively | 220,672 | 294,213 | ||||||
Rebates receivable | 62,901 | 101,085 | ||||||
Other receivables | 5,788 | 8,782 | ||||||
Receivable from Land O’ Lakes, Inc. | 2,521 | — | ||||||
Inventories | 551,220 | 659,335 | ||||||
Vendor prepayments | 259,299 | 103,664 | ||||||
Prepaid expenses | 2,282 | 9,360 | ||||||
Assets held for sale | 341,521 | — | ||||||
Total current assets | 1,453,627 | 1,185,991 | ||||||
Property, plant and equipment: | ||||||||
Land and land improvements | 13,029 | 18,971 | ||||||
Buildings | 67,454 | 71,692 | ||||||
Machinery and equipment | 114,770 | 162,624 | ||||||
Construction in progress | 710 | 22,622 | ||||||
Total property, plant and equipment | 195,963 | 275,909 | ||||||
Less accumulated depreciation | (98,265 | ) | (137,244 | ) | ||||
Net property, plant and equipment | 97,698 | 138,665 | ||||||
Other assets | 17,389 | 27,700 | ||||||
Total assets | $ | 1,568,714 | $ | 1,352,356 | ||||
LIABILITIES AND MEMBERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Cash overdraft | $ | 19,617 | $ | 14,110 | ||||
Accounts payable | 603,418 | 591,149 | ||||||
Customer prepayments | 207,438 | 135,226 | ||||||
Accrued competitive allowances | 60,738 | 55,432 | ||||||
Accrued expenses | 51,630 | 70,712 | ||||||
Payable to Land O’Lakes, Inc. | — | 18,363 | ||||||
Payable to CHS Inc. | 5,911 | 4,169 | ||||||
Other current liabilities | 3,302 | 6,202 | ||||||
Current portion of long-term debt | 755 | — | ||||||
Short-term debt | 142,858 | 107,875 | ||||||
Liabilities held for sale | 123,007 | — | ||||||
Total current liabilities | 1,218,674 | 1,003,238 | ||||||
Long-term debt, less current portion | 104,684 | 104,621 | ||||||
Other noncurrent liabilities | 14,306 | 19,304 | ||||||
Minority interest in subsidiaries | 15,454 | 6,403 | ||||||
Members’ equity: | ||||||||
Contributed capital | 159,089 | 159,089 | ||||||
Retained earnings | 61,614 | 60,763 | ||||||
Accumulated other comprehensive loss | (5,107 | ) | (1,062 | ) | ||||
Total members’ equity | 215,596 | 218,790 | ||||||
Total liabilities and members’ equity | $ | 1,568,714 | $ | 1,352,356 | ||||
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2007 | 2006 | |||||||
Net sales | $ | 4,029,489 | $ | 3,749,632 | ||||
Cost of sales | 3,617,912 | 3,393,522 | ||||||
Gross margin | 411,577 | 356,110 | ||||||
Selling, general and administrative expense | 314,073 | 284,504 | ||||||
Restructuring and impairment charges | 27,750 | — | ||||||
Gain on sale of assets | (2,699 | ) | (5,606 | ) | ||||
Earnings from operations | 72,453 | 77,212 | ||||||
Minority interests | 5,668 | 2,718 | ||||||
Interest expense, net | 26,734 | 26,188 | ||||||
Net earnings | $ | 40,051 | $ | 48,306 | ||||
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2007 | 2006 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 40,051 | $ | 48,306 | ||||
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 29,476 | 19,479 | ||||||
Non-cash portion of restructuring and impairment charges | 26,950 | — | ||||||
Bad debt expense (benefit) | 4,251 | (3,218 | ) | |||||
Minority interests | 5,668 | 2,718 | ||||||
Gain on disposal of property, plant and equipment | (2,699 | ) | (5,606 | ) | ||||
Changes in other non-current assets and liabilities | 16,222 | 673 | ||||||
Changes in current assets and liabilities: | ||||||||
Trade receivables | 69,290 | 27,243 | ||||||
Receivables/payables from related parties | (18,972 | ) | 23,522 | |||||
Rebates receivable | 38,184 | (39,037 | ) | |||||
Other receivables | 2,994 | (386 | ) | |||||
Inventories | 108,115 | (122 | ) | |||||
Vendor prepayments | (155,635 | ) | 67,455 | |||||
Accounts 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 | 937 | ||||||
Net 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 | 7,253 | ||||||
Proceeds 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 | 84,225 | ||||||
Proceeds from issuance of long-term debt | 818 | 4,621 | ||||||
Increase in cash overdrafts | 5,507 | 11,818 | ||||||
Distribution of earnings to members | (39,200 | ) | (57,801 | ) | ||||
Assets and liabilities held for sale | 3,161 | — | ||||||
Net cash provided by financing activities | 5,269 | 42,863 | ||||||
Net change in cash | (2,129 | ) | (24,594 | ) | ||||
Cash at beginning of period | 9,552 | 34,146 | ||||||
Cash at end of period | $ | 7,423 | $ | 9,552 | ||||
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Accumulated | ||||||||||||||||||||
other | Total | |||||||||||||||||||
Contributed | Retained | comprehensive | members’ | Comprehensive | ||||||||||||||||
capital | earnings | (loss) | equity | income | ||||||||||||||||
Balance at August 31, 2005 | $ | 159,089 | $ | 70,258 | $ | (1,423 | ) | $ | 227,924 | |||||||||||
Net earnings | — | 48,306 | — | 48,306 | $ | 48,306 | ||||||||||||||
Minimum pension liability adjustment | — | — | 361 | 361 | 361 | |||||||||||||||
Comprehensive income | $ | 48,667 | ||||||||||||||||||
Distributions paid to members | — | (57,801 | ) | — | (57,801 | ) | ||||||||||||||
Balance at August 31, 2006 | 159,089 | 60,763 | (1,062 | ) | 218,790 | |||||||||||||||
Net earnings | — | 40,051 | — | 40,051 | $ | 40,051 | ||||||||||||||
Minimum pension liability adjustment | — | 115 | 115 | 115 | ||||||||||||||||
Adjustment to initially apply FAS 158 | (4,160 | ) | (4,160 | ) | — | |||||||||||||||
Comprehensive income | $ | 40,166 | ||||||||||||||||||
Distributions paid to members | — | (39,200 | ) | — | (39,200 | ) | ||||||||||||||
Balance at August 31, 2007 | $ | 159,089 | $ | 61,614 | $ | (5,107 | ) | $ | 215,596 | |||||||||||
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NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
-158-
Table of Contents
NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Year ending August 31: | (In thousands) | |||
2008 | $ | 755 | ||
2009 | 48,765 | |||
2010 | 775 | |||
2011 | 52,787 | |||
2012 | 1,236 | |||
2013 and thereafter | 1,121 | |||
Total | $ | 105,439 | ||
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NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(In Thousands) | ||||||||||||
Before | After | |||||||||||
Application Of | Application Of | |||||||||||
Statement 158 | Adjustments | Statement 158 | ||||||||||
Other noncurrent assets | $ | 10,734 | $ | (5,492 | ) | $ | 5,242 | |||||
Other noncurrent liabilities | (8,555 | ) | 1,332 | (7,223 | ) | |||||||
Accumulated other comprehensive loss | 947 | 4,160 | 5,107 |
(In Thousands) | ||||||||||||||||
Pension Benefits | Postretirement Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Benefit 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/A | ||||||||||
Other noncurrent liabilities | — | N/A | (4,513 | ) | N/A | |||||||||||
Prepaid (accrued benefit) | — | 14,273 | — | (5,725 | ) | |||||||||||
Amounts recognized in accumulated other comprehensive income | $ | 5,158 | $ | — | $ | (1,354 | ) | $ | 5,725 |
Pension Benefits | Postretirement Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Discount rate | 6.25 | % | 6.25 | % | 6.25 | % | 6.25 | % | ||||||||
Rate of compensation increase | 2.50 | % | 2.50 | % | N/A | N/A |
Pension Benefits | Postretirement Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Discount 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/A | ||||||||||
Rate of compensation increase | 2.50 | % | 2.50 | % | N/A | N/A |
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NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Year ended August 31, | ||||||||||||||||
(In Thousands) | ||||||||||||||||
Pension Benefits | Postretirement Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Benefit cost | $ | 3,871 | $ | 6,875 | $ | 536 | $ | 476 | ||||||||
Employer contribution | — | — | 406 | 406 | ||||||||||||
Plan participants’ contributions | — | — | 343 | 217 | ||||||||||||
Benefits paid | 2,685 | 2,820 | 750 | 623 |
Plan Assets at August 31 | ||||||||
Asset category | 2007 | 2006 | ||||||
Equity 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 | % | ||||
�� | ||||||||
Expected Benefit | Expected Medicare | |||||||
Payments | 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 | ) | |||
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NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Year Ended August 31, | ||||||||
2007 | 2006 | |||||||
($ in thousands) | ||||||||
Land O’Lakes, Inc. | $ | 11,813 | $ | 12,459 | ||||
CHS Inc. | 6,443 | 5,640 |
Year Ended August 31, | ||||||||
2007 | 2006 | |||||||
($ in thousands) | ||||||||
Land O’Lakes, Inc. | $ | 12,008 | $ | 10,666 | ||||
CHS Inc. | 217,741 | 219,634 |
Year ending August 31, | ($ in thousands) | |||
2008 | $ | 12,164 | ||
2009 | 8,147 | |||
2010 | 4,597 | |||
2011 | 2,451 | |||
2012 | 1,042 | |||
2013 and thereafter | 3,198 |
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NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(In thousands) | ||||||||
2007 | 2006 | |||||||
Restructuring charge | $ | 6,381 | $ | — | ||||
Impairment charges | 21,369 | — | ||||||
Total | $ | 27,750 | $ | — | ||||
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NOTES TO THE AUGUST 31, 2007 AND 2006 CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Cash | $ | 8,716 | ||
Net trade receivables | 146,979 | |||
Rebates receivables | 47,008 | |||
Other receivables | 3,522 | |||
Inventories | 119,030 | |||
Vendor prepayments | 930 | |||
Prepaid expenses | 77 | |||
Net property, plant and equipment | 15,031 | |||
Other assets | 228 | |||
Assets 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 | ) | |
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