2011 March/April Issue - Land O'Lakes Inc.

2010FINANCIALSFINANCIAL NEWSContinuing to Deliver for MembersLand O’Lakes reports 2010 financial results, record cash payouts to membersLand O’Lakes 2010 financial resultsincluded the company’s secondhighestnet earnings and sales, aswell as record-high cash returnedto members.The company reported net earningsof $178 million, down from 2009’s$209 million, but the second-highest inLand O’Lakes history. Net sales were upfrom 2009 at $11.1 billion, and the companyreturned a record-high $125 millionin cash to members.“The economy created a challengingenvironment for all of our businesses,”commented Land O’Lakes President andCEO Chris Policinski. “We took actionto strengthen our capabilities and competitiveness,which helped Land O'Lakesmanage through these difficult marketplaceconditions. As a result of our intensifiedfocus – and the contributions of our9,000 employees – we delivered strong financialresults for our members.”Policinski said 2010’s financial resultsreflected the strength of Land O’Lakesbrands; solid performance by new, innovativeproducts; a continued focus on operatingefficiency and risk management;and the disciplined pursuit of strategicgrowth initiatives.He highlighted the record-high cash returnedto members in 2010. “The economicdownturn has created financialWe took action tostrengthen our capabilitiesand competitiveness, whichhelped Land O’Lakes managethrough these difficultmarketplace conditions.– Chris Policinskistress for many of our members. It’s particularlyimportant that we maintainedstrong performance and delivered record-highreturns. This reflects our commitmentto serving our members by deliveringsubstantial value.”In 2010, the cooperative improved itsmarket position in key segments, includingbranded butter, deli cheese, seed,crop protection products, young animalmilk replacers, premium lifestyle feedand value-added livestock feed.Earnings for 2010 benefited from $6million in unrealized hedging gains (asof Dec. 31, 2010), while 2009’s net earningswere impacted by $37 million in unrealizedhedging gains (as of year-end2009). Unrealized hedging is more anindicator of market conditions at a giventime than of performance.Total balance sheet debt, including capitalleases, was $618 million at year-end, a$76 million (11 percent) reduction versusDec. 31, 2009. The company also improvedits long-term debt-to-capital ratio, whichwas 32.5 percent as of Dec. 31, 2010, comparedto 33.7 percent as of Dec. 31, 2009.Business UnitsDairy FoodsLand O’Lakes Dairy Foods business reportedpretax earnings of $50.3 million forthe year, compared to $61.0 million in pretaxearnings for 2009. Dairy Foods 2010results include a $4.2 million unrealizedhedging gain position as of Dec. 31, 2010,while 2009’s results included $13.0 millionin unrealized hedging gains.While Dairy Foods volumes weremixed, margins were strong nearlyacross the board. Dairy Foods sales forthe year totaled $3.7 billion, comparedto $3.2 billion in 2009.Notably, volume was up in the company’sflagship branded butter despite a veryprice-conscious market, a reflection of thestrength of the LAND O LAKES brand.Innovative products like LAND O LAKES®Butter with Olive Oil also performed well,and Land O’Lakes Foodservice businessoutperformed the industry (led by a significantincrease in school segment volume).While volumes were down in the ConsumerCheese category, Land O’Lakes built on itsleading position in Deli Cheese.8 growingtogether www.landolakesinc.com