Land O'Lakes Reports 2010 Results

Strong Fourth Quarter Contributes to Second-Highest Full-Year Net Earnings and Sales

Mar 01, 2011, 09:46 ET from Land O'Lakes, Inc.

$codeDebug.log("output array of get country targets countryT

ARDEN HILLS, Minn., March 1, 2011 /PRNewswire/ -- Land O'Lakes, Inc., today released its 2010 financial results, which included the company's second-highest net earnings and sales, as well as record-high cash returned to members.  Highlights of 2010 included:  

  • Net earnings of $178 million, down from 2009's $209 million, but the second-highest in Land O'Lakes history;
  • Net sales of $11.1 billion, up from $10.4 billion in 2009 and the company's second-highest net sales ever; and
  • Record-high cash returned to members of $125 million.

Strong fourth-quarter performance contributed to the solid full-year results.  For the quarter, net sales were $2.8 billion, up from $2.5 billion for the same quarter in 2009; while net earnings were $74.6 million, compared to $49.3 million one year ago.

Solid Results in a Challenging Economy

Commenting on 2010 results, Chris Policinski, Land O'Lakes President and Chief Executive Officer, said: "The economy created a challenging environment for all our businesses.  We took action to strengthen our capabilities and competitiveness, which helped Land O'Lakes manage through these difficult marketplace conditions.  As a result of our intensified focus – and the contributions of our 9,000 employees – we delivered strong financial results for our members."

Policinski highlighted the record-high cash returned to members in 2010.  "The economic downturn has created financial stress for many of our members.  So it's particularly important that we maintained strong performance and delivered record-high returns.  This reflects our commitment to serve our members by delivering substantial value."

Policinski pointed to several factors that drove performance in 2010 – the strength of Land O'Lakes brands; solid performance by new, innovative products; a continued focus on operating efficiency and risk management; and the disciplined pursuit of strategic growth initiatives.

In addition, during the year Land O'Lakes improved its market position in key segments including branded butter, deli cheese, seed, crop protection products, young animal milk replacers, premium lifestyle feed and value-added livestock feed.

SALES AND EARNINGS

Land O'Lakes 2010 net sales totaled $11.1 billion, up 7% percent from 2009's $10.4 billion and the second-highest in company history.  Net earnings of $178 million were down from 2009's record $209 million, but still Land O'Lakes second-highest performance ever.

Earnings for 2010 benefited from $6 million in unrealized hedging gains (as of Dec. 31, 2010), while 2009's net earnings were impacted by $37 million in unrealized hedging gains (as of year-end 2009).  Company officials noted that unrealized hedging is more an indicator of market conditions at a given time than of performance.  

BALANCE SHEET

Total balance sheet debt, including capital leases, was $618 million at year-end, a $76 million (11%) reduction versus Dec. 31, 2009.  The company also improved its Long-Term Debt-to-Capital ratio, which was 32.5% as of Dec. 31, 2010, compared to 33.7% as of Dec. 31, 2009.  

BUSINESS UNITS

Dairy Foods

Land O'Lakes Dairy Foods business reported pretax earnings of $50.3 million for the year, compared to $61.0 million in pretax earnings for 2009.  Dairy Foods 2010 results include a $4.2 million unrealized hedging gain position as of Dec. 31, 2010, while 2009's results included $13.0 million in unrealized hedging gains.  

While Dairy Foods volumes were mixed, margins were strong nearly across-the-board. Dairy Foods sales for the year totaled $3.7 billion, compared to $3.2 billion in 2009. Notably, volume was up for the company's flagship branded butter despite a very price-conscious market – a reflection of the strength of the LAND O LAKES brand.  Innovative products, like LAND O LAKES® Butter with Olive Oil, also performed well, and Land O'Lakes Foodservice business outperformed the industry (led by a significant increase in school segment volume).  Although volumes were down in the Consumer Cheese category, Land O'Lakes built on its leading position in Deli Cheese.

Feed

The company's Feed business reported $22.1 million in 2010 pretax earnings, compared to $29.8 million in 2009.  Feed results for 2010 include a $2.6 million unrealized hedging gain, compared to an $18.4 million unrealized hedging gain as of Dec. 31, 2009.  Earnings for 2010 also include a $14 million asset-sale gain.  

Earnings were impacted by an uncertain economy and continued stress in dairy and livestock agriculture, which led to reduced volumes and a lower-priced product mix. Feed sales for 2010 were $3.3 billion, down slightly from $3.4 billion in 2008.  Volume was down significantly in the Livestock segment, while relatively flat in Lifestyle, Milk Replacers and Feed Ingredients.  

Premium Lifestyle feeds, value-added Livestock feeds and the company's industry-leading young animal Milk Replacers all performed well, reflecting Land O'Lakes Purina Feed's continued commitment to animal nutrition research and development.

Layers/Eggs

The company's Layers/Eggs business, MoArk, LLC, reported a $27.2 million pretax loss for 2010, compared to a $2.8 million pretax loss one year ago.  Earnings for 2010 include the impact of a $27 million legal charge, while 2009 earnings include a $12 million asset-sale gain.  Without those one-time items, 2010 operating results would be improved over 2009.  Unrealized hedging impacts in this business were not significant.

The company reported 2010 sales of $510 million in the shell eggs business, compared to $523 million in 2009 sales.  While overall volume was down, volume was up in higher-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 Inputs business – Winfield Solutions, LLC – reported $144.8 million in pretax earnings, versus $136.8 million in pretax earnings for 2009.  Results for Crop Inputs in 2010 include a $1.9 million unrealized hedging loss, while 2009 results include an unrealized 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, with an increase in Crop Protection Products, as well as nearly all Seed categories.

The company also continued to deliver industry-leading crop production insights and information, with more than 20,000 growers and 6,000 sellers participating in crop production knowledge-sharing events at Winfield Solutions' more than 150 Answer Plot® locations.  

Land O'Lakes, Inc. (www.landolakesinc.com) is a national, farmer-owned food and agricultural cooperative with annual sales of $11 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.

LAND O’LAKES, INC.

CONSOLIDATED BALANCE SHEETS




December 31,


December 31,



2010


2009








($ in thousands)

ASSETS

Current assets:





Cash and cash equivalents


$    147,271


$      28,788

Restricted cash


25,000


Receivables, net


1,075,210


1,098,755

Inventories


1,221,054


1,130,618

Prepaid assets


881,295


1,150,364

Other current assets


97,083


79,220

Total current assets


3,446,913


3,487,745






Investments


168,616


196,958

Property, plant and equipment, net


744,602


703,952

Goodwill, net


273,179


274,670

Other intangibles, net


111,934


115,090

Other assets


139,420


145,160

Total assets


$ 4,884,664


$ 4,923,575






LIABILITIES AND EQUITIES

Current liabilities:





Notes and short-term obligations


$      85,580


$    160,521

Current portion of long-term debt


3,184


2,802

Accounts payable


1,087,118


1,082,272

Customer advances


1,267,570


1,328,844

Accrued liabilities


374,167


336,393

Patronage refunds and other member equities payable


44,621


49,298

Total current liabilities


2,862,240


2,960,130






Long-term debt


528,781


530,472

Employee benefits and other liabilities


395,963


391,046

Commitments and contingencies










Equities:





Capital stock


949


985

Member equities


1,006,609


986,339

Accumulated other comprehensive loss


(183,241)


(180,902)

Retained earnings


265,682


228,326

Total Land O'Lakes, Inc. equity


1,089,999


1,034,748

Noncontrolling interests


7,681


7,179

Total equities


1,097,680


1,041,927

Total liabilities and equities


$ 4,884,664


$ 4,923,575



LAND O’LAKES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS










For the Year Ended



December 31,



2010


2009


($ in thousands)

Net sales


$ 11,146,375


$ 10,408,509

Cost of sales


10,218,284


9,448,987

Gross profit


928,091


959,522






Selling, general and administrative


731,544


680,943

Restructuring and impairment


2,634


11,822

Gain on insurance settlement


(1,652)


(3,239)

Earnings from operations


195,565


269,996






Interest expense, net


41,929


53,353

Other income, net


(14,286)


(7,200)

Equity in (earnings) losses of affiliated companies


(20,944)


(8,199)

Earnings (loss) before income taxes


188,866


232,042

Income tax expense (benefit)


9,999


26,720

Net earnings (loss)


178,867


205,322

Less: net earnings (loss) attributable to noncontrolling interests


728


(3,778)

Net earnings (loss) attributable to Land O'Lakes, Inc.


$      178,139


$      209,100






Applied to:





Member equities


$      137,798


$      151,913

Allocated patronage


3,646


3,911

Deferred equities


141,444


155,824



36,695


53,276

Retained earnings


$      178,139


$      209,100



LAND O'LAKES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS









For the Year Ended



December 31,



2010


2009



($ in thousands)

Cash flows from operating activities:





Net earnings attributable to Land O'Lakes, Inc.


$ 178,139


$ 209,100

Adjustments to reconcile net earnings attributable to Land O'Lakes, Inc. to net cash used





by operating activities:





Depreciation and amortization


102,168


94,586

Amortization of deferred financing costs


3,456


4,709

Bad debt expense


9,167


8,133

Proceeds from patronage revolvement received


2,419


3,150

Non-cash patronage income


(2,539)


(1,102)

Insurance recovery - business interruption


2,168


Deferred income tax (benefit) expense


12,305


39,990

(Increase) decrease in other assets


(7,035)


(876)

(Decrease) increase in other liabilities


9,416


24,974

Restructuring and impairment


2,634


11,822

Loss on legal reserve


27,000


(Gain) loss on divestiture of a business


(1,542)


866

Gain on sale of investments


(12,744)


(7,589)

Gain on foreign currency exchange contracts on sale of investment



(177)

Gain on insurance settlement


(1,652)


(3,239)

Equity in earnings of affiliated companies


(20,944)


(8,199)

Dividends from investments in affiliated companies


18,292


38,197

Net earnings (loss) attributable to noncontrolling interests


728


(3,778)

Other


(4,803)


(8,098)

Changes in current assets and liabilities, net of acquisitions and divestitures:





   Restricted cash for legal reserve


(25,000)


-

Receivables


43,545


(14,486)

Inventories


(47,547)


(47,158)

Prepaids and other current assets


248,882


195,513

Accounts payable


4,773


121,267

Customer advances


(61,444)


(137,660)

Accrued liabilities


(15,008)


(94,027)

Net cash provided by operating activities


464,834


425,918

Cash flows from investing activities:





Additions to property, plant and equipment


(139,242)


(148,051)

Acquisitions, net of cash acquired


(54,023)


(37,118)

Investments in affiliates


(6,718)


(3,415)

Distributions from investments in affiliated companies


55,000


70,000

Net proceeds from divestiture of businesses


5,653


13,812

Net proceeds from sale of investments


12,087


17,596

Proceeds from foreign currency exchange contracts on sale of investment



518

Proceeds from sale of property, plant and equipment


2,858


1,626

Insurance proceeds for replacement assets


7,617


7,708

Change in notes receivable


(26,885)


(13,054)

Other



627

Net cash used by investing activities


(143,653)


(89,751)

Cash flows from financing activities:





Increase in short-term debt


(76,289)


(218,966)

Proceeds from issuance of long-term debt


873


329,459

Principal payments on long-term debt and capital lease obligations


(2,409)


(326,204)

Payments for redemption of member equities


(124,620)


(108,266)

Payments for debt issuance costs



(11,961)

Other


(253)


(2,261)

Net cash provided by financing activities


(202,698)


(338,199)






Net increase in cash and cash equivalents


118,483


(2,032)

Cash and cash equivalents at beginning of the period


28,788


30,820

Cash and cash equivalents at end of the period


$ 147,271


$   28,788



SOURCE Land O'Lakes, Inc.



RELATED LINKS

http://www.landolakesinc.com