Published:
Land O'Lakes Reports Third-Quarter and Year-to-Date Sales and Earnings
ARDEN HILLS, Minn., Nov. 5 /PRNewswire-FirstCall/ -- Land O'Lakes, Inc. today reported third-quarter net sales of $2.2 billion and a net loss for the quarter of $4.3 million, as compared to net sales of $2.8 billion and net earnings of $28.6 million for the same quarter one year ago. Year-to-date, the company reported net sales of $7.9 billion and net earnings of $159.8 million, as compared to $9.4 billion and $192.6 million, respectively, for the first three quarters of 2008.
Land O'Lakes President and Chief Executive Officer Chris Policinski said third-quarter performance was in line with the company's expectations, with overall year-to-date results affected by a combination of lower commodity prices and a consumer shift toward a lower-priced product mix.
"We have performed well in a very challenging economic environment," Policinski said. "Our third-quarter performance is typically soft due to seasonal impacts. Year-to-date, we are on track with our projections and we remain cautiously optimistic about prospects for the fourth quarter. We are maintaining our earlier guidance (earnings projections) for year-end."
Policinski added that Land O'Lakes $160 million in year-to-date earnings reflects the company's commitment to best-cost discipline, the strength of its flagship brands, market-responsive product mix adjustments and the contributions of an experienced and dedicated leadership team and work force.
"While we have not been immune to the impact of the global recession and 2009's volatile economic conditions, we have taken a disciplined approach to economic and marketplace challenges and, as a result, have delivered solid results," he said.
Land O'Lakes total EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $288.3 million year-to-date and $34.2 million for the quarter, versus $346.3 million and $73.2 million for the same periods in 2008.
The company also reports EBITDA on a normalized basis, excluding the effects of unrealized hedging, significant asset sales or impairments, legal settlements, debt extinguishment costs and other special items. Year-to-date normalized EBITDA was $254.6 million, versus $371.4 million for the same period one year ago. Normalized EBITDA for the quarter was $38.3 million, compared to $99.3 million for the third quarter of 2008. The company maintained its guidance for full-year (2009) normalized EBITDA at $340 million.
Dairy Foods
In Dairy Foods, the company reported third-quarter sales of $776 million and pretax earnings of $8.9 million, versus sales of $985 million and a $25.4 million pretax loss for the third quarter of 2008. Year-to-date sales in Dairy Foods were $2.2 billion, versus $3.1 billion for the first three quarters of 2008. The company reported $9.0 million in pretax earnings in Dairy Foods through September, versus $14.2 million in pretax earnings for the first three quarters of 2008.
Volumes in Dairy Foods were mixed, but generally reflected a consumer shift toward lower-priced private label products. Overall Value Added volume was down 1 percent versus one year ago. Volume in the company's industry-leading branded butter was down 1 percent, while the company's private label butter volume was up 1 percent. Retail cheese volume (Deli and Dairy Case) was down 4 percent versus the first three quarters of 2008, while Dairy Solutions (Foodservice and Ingredient Solutions) was up 7 percent. In the Industrial segment, Cheese volumes were up 6 percent over the same period last year, Whey volume was down 1 percent and volume in Butter By-Products was flat.
Company officials, while noting that Dairy Foods' performance over the first three quarters was negatively affected by commodity market volatility and the impact of higher prices and economic uncertainty on consumer purchasing decisions, indicated expectations for a strong fourth quarter. Fourth-quarter results, they said, should be bolstered by traditional holiday volume increases and the effective hedging of inventory positions earlier in the year, which should generate fourth-quarter gains.
Feed
The company's Feed division reported $833 million in sales and a pretax loss of $0.8 million for the third quarter, versus $991 million in sales and a pretax loss of $35.1 million for the third quarter of 2008. Year-to-date, Feed sales totaled $2.6 billion, with pretax earnings of $24.4 million, compared to $2.9 billion in sales and a $4.7 million pretax loss through the first three quarters of 2008. Company officials indicated the earnings gain is largely attributable to significant 2009 unrealized hedging gains, versus significant unrealized hedging losses at the end of the third quarter one year ago.
Feed volumes were mixed year-over-year, with Livestock feed volume down 12 percent versus the first nine months of 2008, Lifestyle feed volume up 3 percent, Milk Replacers up 7 percent and Feed Ingredients flat.
As in Dairy Foods, Feed's performance has been affected by a shift toward a lower-priced product mix, particularly in the Dairy and Cattle feed segments, as producers respond to the financial stress of lower commodity prices. Company officials expect a solid fourth quarter in Feed, due to traditional cold weather volume increases, effective product mix adjustments and targeted marketing efforts.
Layers/Eggs
The company participates in the layers/shell eggs industry through Moark LLC, a wholly owned subsidiary. For the third quarter, the company recorded $111 million in sales and a $14.3 million pretax loss in Eggs, compared to $135 million in sales and a $10.3 million pretax loss for the same quarter in 2008. Year-to-date egg sales were $369 million, compared to $455 million through the same period one year ago. The company reported a $10.0 million pretax loss in Eggs through September, compared to $33.0 million in pretax earnings for the first nine months of 2008.
The earnings decline is the result of a sharp price drop in this very cyclical business. Year-to-date (through the third quarter) average egg prices are $1.03 per dozen, compared to $1.35 per dozen over the first three quarters of last year. The company reported a 4 percent increase in shell egg volume (first nine months of 2009 versus the first nine months of 2008). Volume trends reflected the impact of the economy on consumer purchasing patterns, with non-branded shell egg volume up 5 percent and branded and specialty egg volume up just 1 percent.
Going forward, the company will continue its focus on cost reduction, operating efficiency and effectively serving the commodity egg market, while also building its branded and specialty egg volume and market share.
Seed
In its off-season, the company's Seed business reported third-quarter sales of negative $15 million due to seed returns (which are typical in this quarter), and a pretax loss of $12.9 million, as compared to sales of $45 million and a pretax loss of $7.3 million for the third quarter of 2008. Through September, Seed reported $1.1 billion in sales and $68.9 million in pretax earnings, versus $920 million in sales and $47.5 million in pretax earnings one year ago.
From a volume perspective, year-to-date corn volumes were down 7 percent compared with one year ago, soybeans were down 9 percent and alfalfa was down 20 percent. A number of factors contributed to the volume declines, including a general increase in seed returns, a reduction in planted acres (corn) and weakness in dairy markets (alfalfa).
Seed's strong performance continues to be driven by an ongoing focus on the delivery of the best genetics and traits, the leveraging of expertise through the company's "Expert Seller" and Answer Plot(TM) programs, and the strength of the company's Seed/Crop Production Products business alignment (under the WinField Solutions(TM) marketing identity).
Agronomy/Crop Protection Products
The company's Agronomy business consists of its wholly owned Crop Protection Products business (aligned with Seed under the WinField Solutions marketing identity) and 50 percent ownership in Agriliance LLC, a joint venture retail agronomy company.
For the third quarter, Agronomy sales were $483 million with pretax earnings of $16.0 million, as compared to sales of $642 million and pretax earnings of $117.6 million for the same quarter of 2008. Company officials noted that the quarter-versus-quarter variance is largely due to the timing of crop protection product vendor rebates, which were recognized earlier this year.
Year-to-date, Agronomy reported sales of $1.7 billion and pretax earnings of $85.3 million, versus $2.1 billion in sales and $155.2 million in pretax earnings one year ago. The decline in sales and earnings is due to commodity price reductions and the absence this year of some one-time sourcing opportunities that enhanced earnings in 2008.
Company officials noted that Land O'Lakes and joint venture partner CHS Inc. are working to reposition the Agriliance LLC retail assets, and that they anticipate the majority of those assets will be sold, through a number of transactions, by the first quarter of 2010. Transaction details were not disclosed, but it was indicated that, on an aggregate basis, the transactions should generate $100 million in cash receipts by the end of the first quarter of 2010 (net the cost of the acquired properties plus associated working capital). Twenty-five-million dollars of this cash was received through a dividend distribution from Agriliance during the third quarter of this year.
Debt/Financing
Seasonal debt requirements in the third quarter resulted in total debt of $1.15 billion as of September 30, 2009. Total debt was $1.11 billion at the same point in 2008. Liquidity stood at $328 million (cash-on-hand and unused borrowing authority) at the end of September 2009, up from $245 million on the same date one year ago.
Land O'Lakes officials also indicated the company is restructuring its debt, calling $150 million of 9 percent secured bonds due in 2010 and $174 million of 8.75 percent unsecured bonds due in 2011. A call notice to bondholders was issued on October 29. The bonds will be redeemed at par with accrued interest on December 15, 2009. The repurchase will be financed with a $325 million secured private placement facility consisting of 7-to-12 year debt at an average interest rate of approximately 6.5 percent.
Effective October 29, 2009, the company replaced its existing $400 million revolving credit facility due in 2011. The new revolving credit facility has been sized at $375 million and will mature in April 2013. The pricing, terms and conditions of the new facility are largely unchanged. Additionally, the company extended the term of its $400 million securitization facility to 3½ years and increased the pricing on that facility to current market rates.
Once the public bonds have been redeemed, Land O'Lakes obligation to file periodic reports with the Securities and Exchange Commission (SEC) will end. Accordingly, the company does not plan to make additional filings with the SEC after it submits its third quarter 10-Q Report, which is expected to be filed by November 13, 2009.
Conference Call
The national food and agricultural cooperative will discuss these results in a conference call scheduled for 1:00 p.m., Eastern Standard Time, November 5, 2009. The dial-in numbers are: USA - 1-800-862-9098; International - 1-785-424-1051. The Conference ID is LANDOLAKES. A replay of the conference call will be available through November 12, 2009, at: USA - 1-800-283-4799; International - 1-402-220-0860.
Land O'Lakes, Inc. (www.landolakesinc.com) is a national, farmer-owned food and agricultural cooperative with 2008 annual sales of approximately $12 billion. Land O'Lakes is a Fortune 250 company that does business in all 50 states and more than 50 countries. It is a leading marketer of a full line of dairy-based consumer, foodservice and food ingredient products across the United States; serves its international customers with a variety of food and animal feed ingredients; and provides farmers and ranchers with an extensive line of agricultural supplies (feed, seed, and crop protection products) and services. Land O'Lakes also provides agricultural assistance and technical training in more than 25 developing nations.
Cautionary Statement
Certain information included in this news release is forward-looking. Forward-looking information is based on currently available information and management's estimates, assumptions and projections. Actual outcomes are subject to significant uncertainties, many of which are beyond Land O'Lakes control. Important risk factors could cause actual future results to differ materially from those currently estimated by management. For a discussion of important risk factors that may materially affect management's estimates and Land O'Lakes results, please view Land O'Lakes most recent periodic filings, which can be found on the Securities and Exchange Commission's website (www.sec.gov) and the company's website (www.landolakesinc.com).
LAND O'LAKES, INC.
Consolidated Balance Sheets
($ in thousands)
September 30, December 31,
2009 2008
---- ----
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $29,734 $30,820
Receivables, net 1,206,587 1,104,261
Inventories 1,088,832 1,083,978
Prepaid assets 42,251 1,101,005
Other current assets 60,787 123,504
-------------------- ------ -------
Total current assets 2,428,191 3,443,568
Investments 258,674 314,487
Property, plant and equipment, net 693,846 658,261
Goodwill, net 276,657 277,176
Other intangibles, net 116,406 120,982
Other assets 158,317 166,838
------------ ------- -------
Total assets $3,932,091 $4,981,312
------------ ---------- ----------
Liabilities and Equities
Current liabilities:
Notes and short-term obligations $610,612 $409,370
Current portion of long-term debt 2,581 2,864
Accounts payable 928,840 1,175,995
Customer advances 33,515 1,045,705
Accrued liabilities 383,395 423,494
Patronage refunds and other member equities
payable 39,600 37,751
------------------------------------------- ------ ------
Total current liabilities 1,998,543 3,095,179
Long-term debt 535,231 531,955
Employee benefits and other liabilities 361,841 358,404
Commitments and contingencies
Equities:
Capital stock 1,439 1,611
Member equities 964,665 947,141
Accumulated other comprehensive loss (166,876) (150,277)
Retained earnings 223,107 178,377
----------------- ------- -------
Total Land O'Lakes, Inc. equity 1,022,335 976,852
Noncontrolling interests 14,141 18,922
------------------------ ------ ------
Total equities 1,036,476 995,774
-------------- --------- -------
Total liabilities and equities $3,932,091 $4,981,312
------------------------------ ---------- ----------
LAND O'LAKES, INC.
Consolidated Statements of Operations
($ in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $2,177,524 $2,783,930 $7,939,337 $9,368,794
Cost of sales 1,987,262 2,547,330 7,209,916 8,569,999
------------- --------- --------- --------- ---------
Gross profit 190,262 236,600 729,421 798,795
Selling, general and
administrative 179,412 204,642 508,473 562,330
Restructuring and
impairment 803 - 10,036 41
Gain on insurance
settlement - (4,032) - (4,032)
----------------- --- ------ --- ------
Earnings from
operations 10,047 35,990 210,912 240,456
Interest expense, net 12,462 15,369 38,300 48,091
Other (income)
expense, net (300) - (7,028) 12
Equity in losses
(earnings) of
affiliated companies 978 (13,541) (2,523) (38,099)
--------------------- --- ------- ------ -------
(Loss) earnings before
income taxes (3,093) 34,162 182,163 230,452
Income tax expense 1,213 1,804 25,461 22,442
------------------ ----- ----- ------ ------
Net (loss) earnings (4,306) 32,358 156,702 208,010
Less: net earnings
(loss) attributable to
noncontrolling
interests 8 3,796 (3,131) 15,380
----------------------- --- ----- ------ ------
Net (loss) earnings
attributable to Land
O'Lakes, Inc. $(4,314) $28,562 $159,833 $192,630
--------------------- ------- ------- -------- --------
LAND O'LAKES, INC.
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
Nine Months Ended
September 30,
-------------
2009 2008
---- ----
Cash flows from operating activities:
Net earnings attributable to Land O'Lakes, Inc. $159,833 $192,630
Adjustments to reconcile net earnings
attributable to Land O'Lakes, Inc. to net cash
used by operating activities:
Depreciation and amortization 67,870 67,776
Amortization of deferred financing costs 1,868 3,413
Bad debt expense 6,479 5,731
Proceeds from patronage revolvement received 236 1,777
Non-cash patronage income (798) (4,177)
Deferred income tax expense (benefit) 41,501 (20,707)
Decrease (increase) in other assets 764 (2,269)
Increase in other liabilities 20,224 21,399
Restructuring and impairment 10,036 41
Loss on divestiture of a business 407 -
(Gain) loss on sale of investments (6,958) 12
Gain on foreign currency exchange contracts on
sale of investment (177) -
Gain on insurance settlement - (4,032)
Equity in earnings of affiliated companies (2,523) (38,099)
Dividends from investments in affiliated
companies 36,140 32,652
Net (loss) earnings attributable to
noncontrolling interests (3,131) 15,380
Other (4,031) (2,525)
Changes in current assets and liabilities, net of
acquisitions and divestitures:
Receivables (119,141) (412,580)
Inventories (5,964) (102,923)
Prepaids and other current assets 1,103,113 810,792
Accounts payable (246,306) 15,011
Customer advances (1,012,190) (933,016)
Accrued liabilities (53,999) 154,816
------------------- ------- -------
Net cash used by operating activities (6,747) (198,898)
Cash flows from investing activities:
Additions to property, plant and equipment (108,775) (120,533)
Acquisitions, net of cash acquired (2,745) (9,040)
Investments in affiliates (3,290) (50,860)
Distributions from investments in affiliated
companies - 8,824
Proceeds from divestiture of a business 2,698 -
Proceeds from sale of investments 16,965 49
Proceeds from foreign currency exchange
contracts on sale of investment 518 -
Proceeds from sale of property, plant and
equipment 1,493 5,581
Insurance proceeds for replacement assets 6,538 5,321
Change in notes receivable (12,686) (11,606)
Other 250 3,049
----- --- -----
Net cash used by investing activities (99,034) (169,215)
Cash flows from financing activities:
Increase in short-term debt 201,243 388,685
Proceeds from issuance of long-term debt 4,459 496
Principal payments on long-term debt and capital
lease obligations (1,950) (14,138)
Payments for redemption of member equities (95,762) (94,896)
Payments for debt issuance costs (1,486) -
Other (1,809) (38)
----- ------ ---
Net cash provided by financing activities 104,695 280,109
----------------------------------------- ------- -------
Net decrease in cash and cash equivalents (1,086) (88,004)
Cash and cash equivalents at beginning of the
period 30,820 116,839
--------------------------------------------- ------ -------
Cash and cash equivalents at end of the period $29,734 $28,835
---------------------------------------------- ------- -------
LAND O'LAKES, INC.
EBITDA
($ in thousands)
(Unaudited)
Twelve
Nine Months Ended Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009
---- ---- ----
Earnings before income taxes $182,163 $230,452 $141,967
Interest expense, net 38,300 48,091 53,441
Depreciation 63,943 57,812 84,596
Amortization 3,927 9,964 7,307
------------ ----- ----- -----
Total EBITDA 288,333 346,319 287,311
Noncontrolling interests 2,979 (15,553) 2,404
Unrealized hedging (gain) loss (39,742) 35,731 (23,223)
Gain on insurance settlement - (4,032) (6,606)
Loss on divestitures 407 - 407
(Gain) loss on sale of investments (7,135) 12 (18,796)
(Gain) on sale of intangible (300) - (300)
Restructuring and impairments 10,036 41 12,888
Environmental reserve - 8,900 -
--------------------- --- ----- ---
Normalized EBITDA $254,578 $371,418 $254,085
------------------- -------- -------- --------
SOURCE Land O'Lakes, Inc.
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