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

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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
FeedThe company’s Feed business reported$22.1 million in 2010 pretax earnings,compared to $29.8 million in 2009. Feedresults for 2010 include a $2.6 millionunrealized hedging gain, compared to an$18.4 million unrealized hedging gain asof Dec. 31, 2009. Earnings for 2010 alsoinclude a $14 million asset-sale gain.Earnings were impacted by an uncertaineconomy and continued stress in dairy andlivestock agriculture, which led to reducedvolumes and a lower-priced product mix.Feed sales for 2010 were $3.3 billion, downslightly from $3.4 billion in 2009. Volumewas down significantly in the Livestock segment,while relatively flat in Lifestyle, MilkReplacers and Feed Ingredients.Premium Lifestyle feeds, value-addedLivestock feeds and the company’s industry-leadingyoung animal Milk Replacers allThe company reported 2010 sales of$510 million in the shell eggs business,compared to $523 million in 2009. Whileoverall volume was down, volume was up inhigher-value branded and specialty eggs,led by LAND O LAKES branded eggs.Crop Inputs (Seed, Crop Protection Products,Retail Agronomy Solutions)In 2010, the company’s Crop Inputsbusiness – Winfield Solutions, LLC – reported$144.8 million in pretax earnings,versus $138.8 million in pretax earningsfor 2009. Results for Crop Inputs in2010 include a $1.9 million unrealizedHIGHLIGHTS OF 2010hedging loss, while 2009 results includeunrealized hedging gain of $11.1 million.Crop Input sales for 2010 were $3.7 billion,versus sales of $3.3 billion in 2009,despite overall devaluation in the category.Volumes were strong across the board, withan increase in Crop Protection Products, aswell as nearly all Seed categories.The company also continued to deliverindustry-leading crop production insightsand information, with more than 20,000growers and 6,000 sellers participatingin crop production knowledge-sharingevents at Winfield Solutions more than150 Answer Plot® locations. ■2010 2009Earnings were impacted byan uncertain economy andcontinued stress in dairy andlivestock agriculture, whichled to reduced volumes anda lower-priced product mix.performed well, reflecting Land O’LakesPurina Feed’s continued commitment toanimal nutrition research and development.Layers/EggsThe company’s Layers/Eggs business,MoArk, LLC, reported a $27.2 millionpretax loss for 2010, compared to a $2.8million pretax loss one year ago. Earningsfor 2010 include the impact of a $27 millionlitigation-related charge, while 2009earnings include a $12 million asset-salegain. Without those one-time events, 2010operating results would be improved over2009. Unrealized hedging impacts in thisbusiness were not significant.For the Year: ($ in thousands)Net sales $11,146,375 $10,408,509Net earnings 178,139 209,100Allocated patronage equities 137,798 151,913Cash returned to members 124,620 108,266At Year End: ($ in thousands)Total assets $4,884,664 $4,923,575Working capital 584,673 527,615Long-term debt 528,781 530,472Equities 1,097,680 1,041,927Financial Measures:Return on equity 17.2% 21.4%Return on invested capital 11.9% 12.1%Long-term debt-to-capital 32.5% 33.7%Current ratio 1.20 1.18Membership:Member associations 945 980Individual members 4,460 4,638www.landolakesinc.com MARCH/APRIL 2011 9
Page 1 and 2: TMMARCH/APRIL 2011THE FUTURE OFTHE
Page 3 and 4: Table of ContentsMARCH/APRIL 2011TM
Page 5 and 6: One of those messages is that in th
Page 7: of a legislator in Washington or th
Page 11 and 12: LAND O’LAKES EXECUTIVE AGRIBUSINE
Page 13 and 14: PROFILESSARA MORTIMORE, Vice Presid
Page 15 and 16: It’s easy to find critics of biot
Page 17 and 18: ECONOMIC OUTLOOK by Tom WegnerA Loo
Page 19 and 20: Josh (left) and John Zonneveld Jr.
Page 21 and 22: A truck picks up milk at Hilltop Da
Page 23 and 24: organized through MBGs in early 200
Page 25 and 26: outbreak near our plant was so broa
Page 27 and 28: 25 Years of CooperativeServiceEach
Page 29 and 30: In addition to sponsoring the event
Page 31 and 32: BUNNY CREAM PUFFSThese delightful c

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

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