Land O'Lakes Reports 2009 Results
Net Sales of $10.4 billion, Record Net Earnings of $209 million
ARDEN HILLS, Minn., Feb. 22 /PRNewswire/ -- Land O'Lakes, Inc., today released its 2009 financial results, which included record-high net earnings, achieved in what company officials termed a difficult and volatile economic environment and marketplace. Highlights of the release included:
- Record net earnings of $209 million;
- Record-high cash returned to members of $108 million; and
- Net sales of $10 billion, the company's second-highest revenue total.
Strong Results in a Challenging Economy
Commenting on Land O'Lakes' strong 2009 performance, Chris Policinski, Land O'Lakes President and Chief Executive Officer, said: "Despite a weak economy, Land O'Lakes delivered solid financial results – including record-high net earnings – because we met the needs of a changing marketplace. The strength of our brands, aggressive and targeted marketing, and adjusting our product mix to meet customer and consumer preferences all contributed to our outstanding results."
Policinski cited several performance highlights, including:
- A volume increase in the company's flagship branded butter business of 2 percent, in a highly price-conscious market;
- An 11 percent increase in Foodservice volume, while the segment as a whole was down year-over-year;
- A 4 percent volume increase in the company's industry-leading animal milk replacer product line, despite financial stress across the dairy industry;
- An increase in Lifestyle feed volume of 2 percent, led by strong gains and record-high volumes in the companion animal segment; and
- A 5 percent increase in overall shell egg volume, with a 7 percent volume increase in the premium-priced branded / specialty egg segment.
Policinski also pointed to the company's leadership in innovation, with Land O'Lakes launching a wide range of new branded products across its businesses during the year. "What's particularly good to see is that 9 percent of our 2009 Dairy Foods Value Added volume was generated by the new products category – which are products introduced over the past three years."
Land O'Lakes also focused on balance sheet strength and cost control in 2009. "We maintained or improved key financial measures, and total debt was down by $250 million, as compared with year-end 2008," Policinski said. "We also achieved nearly $70 million in cost savings, and we refinanced our publicly held debt at attractive interest rates."
SALES AND EARNINGS
Land O'Lakes 2009 sales totaled $10.4 billion, down 14 percent from 2008's record $12.0 billion. The 2009 decline was largely due to lower commodity prices nearly across all businesses, and the impact of the recessionary economy on consumer and customer purchasing decisions.
Record-high net earnings of $209 million for 2009 were up 31 percent from 2008.
Earnings for 2009 benefited from $37 million of unrealized hedging gains (as of year-end 2009) versus $52 million in unrealized edging losses (as of year-end 2008). Company officials noted that unrealized hedging is more an indicator of market conditions at a given time than of performance. If the impact of hedging were factored out, 2009's net earnings would be second only to 2008.
BALANCE SHEET
Total balance sheet debt, including capital leases, was $694 million at year-end (versus $944 million as of Dec. 31, 2008). The company improved its Long-Term Debt-to-Capital ratio, which was 33.7 percent as of Dec. 31, 2009, compared to 34.8 percent as of Dec. 31, 2008.
As previously announced, the company successfully completed a refinancing during the fourth quarter of 2009, which included the redemption of its publicly-held bonds. As a result of that restructuring, the company is no longer required to file periodic reports with the Securities and Exchange Commission, and has discontinued its quarterly public conference calls.
BUSINESS UNITS
Dairy Foods
Land O'Lakes Dairy Foods business reported pretax earnings of $61.0 million for the year, compared to $16.3 million in pretax earnings for 2008. Dairy Foods 2009 results include a $13.0 million unrealized hedging gain position as of Dec. 31, 2009, while 2008's results included a $13.5 million unrealized hedging loss.
Dairy Foods sales for the year totaled $3.2 billion, compared to $4.1 billion in 2008, primarily the result of lower commodity prices and a price-conscious marketplace.
Volumes were flat with 2008, but mixed by category. Notably, volume was up for the company's flagship branded butter, a reflection of the strength of the company's LAND O LAKES brand. While volumes were down slightly in the Consumer Cheese category, Dairy Solutions (Foodservice and Ingredients Solutions) volumes were up, with increases in the School and Government segments offsetting a decline in Full Service Restaurant sales.
Feed
The company's Feed business reported $29.8 million in 2009 pretax earnings, up from $500,000 in 2008. Feed results for 2009 include an $18.4 million unrealized hedging gain, compared to a $29.0 million unrealized hedging loss as of Dec. 31, 2008.
Feed sales for 2009 were $3.4 billion, down from $3.9 billion in 2008. Volumes were mixed, with financial stress and lower commodity prices in the dairy and beef markets contributing to reduced volumes and a lower-priced product mix in the Livestock segment. Lifestyle feed and Milk Replacer volumes were up.
Layers/Eggs
The company's Layers/Eggs business, MoArk LLC, reported a $2.8 million pretax loss for 2009, compared to $29.9 million in pretax earnings for 2008. Earnings and dollar sales were both down in 2009, driven by a 20 percent decline in average commodity egg prices year-over-year. Results for 2009 include $520,000 in unrealized hedging gains (as of Dec. 31), while 2008 results included an $847,000 unrealized hedging loss.
The company reported 2009 sales of $523 million in this business, compared to $606 million in 2008 sales. Volume, however, was up notably in commodity and specialty/branded eggs.
Crop Inputs (Seed, Crop Protection Products, Retail Agronomy Solutions)
In 2009, the company's Crop Inputs business reported $136.8 million in pretax earnings, versus $161.0 million in comparable pretax earnings for 2008. Results for Crop Inputs in 2009 include $11.1 million in unrealized hedging gains, while 2008 results include unrealized hedging losses of $14.5 million.
Crop Inputs sales for 2009 were $3.3 billion, versus comparable sales of $3.5 billion in 2008.
Volumes in both Seed and Crop Protection Products were down due to a combination of reduced acreage planted in some segments and higher than expected customer carryover from a strong 2008.
Crop Inputs results for 2009 included a $28.2 million loss in Agronomy, primarily related to the company's ownership position in Agriliance LLC, a retail agronomy joint venture. The company has been working to reposition these assets as it extends its strategic focus on the wholesale seed and crop protection products business. This repositioning effort is now largely complete, and company officials indicated they expect to reposition the remaining assets in the first half of 2010.
Land O'Lakes, Inc. (www.landolakesinc.com) is a national, farmer-owned food and agricultural cooperative with annual sales of $10 billion. Land O'Lakes does business in all 50 states and more than 60 countries. It is a leading marketer of a full line of dairy-based consumer, foodservice and food ingredient products across the United States; serves its international customers with a variety of food and animal feed ingredients; and provides farmers and ranchers with an extensive line of agricultural supplies (feed, seed, and crop protection products) and services. Land O'Lakes also provides agricultural assistance and technical training in more than 25 developing nations.
Attachment: Financials
LAND O’LAKES, INC.
Consolidated Balance Sheets
($ in thousands)
December 31, December 31,
2009 2008
---- ----
Assets
Current assets:
Cash and cash equivalents $28,788 $30,820
Receivables, net 1,098,755 1,104,261
Inventories 1,130,618 1,083,978
Prepaid assets 1,150,364 1,101,005
Other current assets 79,220 123,504
-------------------- ------ -------
Total current assets 3,487,745 3,443,568
Investments 196,958 314,487
Property, plant and equipment, net 703,952 658,261
Goodwill, net 274,670 277,176
Other intangibles, net 115,090 120,982
Other assets 145,160 166,838
------------ ------- -------
Total assets $4,923,575 $4,981,312
============= ========= ==========
Liabilities and Equities
Current liabilities:
Notes and short-term obligations $160,521 $409,370
Current portion of long-term debt 2,802 2,864
Accounts payable 1,082,272 1,175,995
Customer advances 1,328,844 1,045,705
Accrued liabilities 336,393 423,494
Patronage refunds and other member
equities payable 49,298 37,751
---------------------------------- ------ ------
Total current liabilities 2,960,130 3,095,179
Long-term debt 530,472 531,955
Employee benefits and other
liabilities 391,046 358,404
Commitments and contingencies
Equities:
Capital stock 985 1,611
Member equities 986,339 947,141
Accumulated other comprehensive
loss (180,902) (150,277)
Retained earnings 228,326 178,377
----------------- ------- -------
Total Land O'Lakes, Inc. equity 1,034,748 976,852
Noncontrolling interests 7,179 18,922
------------------------ ----- ------
Total equities 1,041,927 995,774
-------------- --------- -------
Total liabilities and equities $4,923,575 $4,981,312
============================== ========== ==========
LAND O’LAKES, INC.
Consolidated Statements of Operations
($ in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $2,469,172 $2,670,465 $10,408,509 $12,039,259
Cost of sales 2,239,071 2,513,911 9,448,987 11,083,910
------------- --------- --------- --------- ----------
Gross profit 230,101 156,554 959,522 955,349
Selling, general and
administrative 172,470 194,276 680,943 756,606
Restructuring and
impairment 1,786 2,852 11,822 2,893
Gain on insurance
settlement (3,239) (6,606) (3,239) (10,638)
----------------- ------ ------ ------ -------
Earnings from
operations 59,084 (33,968) 269,996 206,488
Interest expense,
net 15,053 15,141 53,353 63,232
Other income, net (172) (12,040) (7,200) (12,028)
Equity in
(earnings)
losses of
affiliated
companies (5,676) 3,127 (8,199) (34,972)
----------- ------ ----- ------ -------
Earnings (loss)
before income taxes 49,879 (40,196) 232,042 190,256
Income tax expense
(benefit) 1,259 (7,670) 26,720 14,772
------------------ ----- ------ ------ ------
Net earnings (loss) 48,620 (32,526) 205,322 175,484
Less: net (loss)
earnings
attributable to
noncontrolling
interests (647) 484 (3,778) 15,864
---------------- ---- --- ------ ------
Net earnings
(loss)
attributable to
Land O'Lakes,
Inc. $49,267 $(33,010) $209,100 $159,620
================ ======= ======== ======== ========
LAND O'LAKES, INC.
Consolidated Statements of Cash Flows
($ in thousands)
Twelve Months Ended
December 31,
------------
2009 2008
---- ----
Cash flows from operating activities:
Net earnings attributable to Land O'Lakes, Inc. $209,100 $159,620
Adjustments to reconcile net earnings
attributable to Land O'Lakes, Inc. to net cash
provided by operating activities:
Depreciation and amortization 94,586 91,809
Amortization of deferred financing costs 4,709 4,443
Gain on extinguishment of debt - (379)
Bad debt expense 8,133 6,850
Proceeds from patronage revolvement received 3,150 7,490
Non-cash patronage income (1,102) (5,757)
Deferred income tax expense (benefit) 39,990 (5,417)
Decrease (increase) in other assets (876) (1,121)
Increase in other liabilities 24,974 17,851
Restructuring and impairment 11,822 2,893
Loss on divestiture of a business 866 -
(Gain) loss on sale of investments (7,589) (7,458)
Gain on foreign currency exchange contracts on
sale of investment (177) (4,191)
Gain on insurance settlement (3,239) (10,638)
Equity in earnings of affiliated companies (8,199) (34,972)
Dividends from investments in affiliated
companies 38,197 45,142
Net (loss) earnings attributable to
noncontrolling interests (3,778) 15,864
Other (8,098) (1,232)
Changes in current assets and liabilities,
net of acquisitions and divestitures:
Receivables (14,486) (88,736)
Inventories (47,158) (97,017)
Prepaids and other current assets 195,513 (269,075)
Accounts payable 121,267 19,171
Customer advances (137,660) 101,292
Accrued liabilities (94,027) 58,515
------------------- ------- ------
Net cash provided by operating activities 425,918 4,947
Cash flows from investing activities:
Additions to property, plant and equipment (148,051) (171,344)
Acquisitions, net of cash acquired (37,118) (9,040)
Investments in affiliates (3,415) (51,136)
Distributions from investments in affiliated
companies 70,000 1,678
Net proceeds from divestiture of businesses 13,812 -
Net proceeds from sale of investments 17,596 21,213
Proceeds from foreign currency exchange
contracts on sale of investment 518 3,850
Proceeds from sale of property, plant and
equipment 1,626 6,215
Insurance proceeds for replacement assets 7,708 4,903
Change in notes receivable (13,054) (11,596)
Other 627 3,050
----- --- -----
Net cash used by investing activities (89,751) (202,207)
Cash flows from financing activities:
Increase in short-term debt (218,966) 266,829
Proceeds from issuance of long-term debt 329,459 496
Principal payments on long-term debt and capital
lease obligations (326,204) (58,344)
Payments for redemption of member equities (108,266) (97,590)
Payments for debt issuance costs (11,961) -
Other (2,261) (150)
----- ------ ----
Net cash (used) provided by financing activities (338,199) 111,241
------------------------------------------------ -------- -------
Net decrease in cash and cash equivalents (2,032) (86,019)
Cash and cash equivalents at beginning of the
period 30,820 116,839
--------------------------------------------- ------ -------
Cash and cash equivalents at end of the period $28,788 $30,820
============================================== ======= =======
SOURCE Land O'Lakes, Inc.
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