Arden Hills, Minnesota
July 26, 2002

Land O'Lakes, Inc., today reported $48.3 million in second quarter net earnings, a figure which included $32.7 million in proceeds from several negotiated settlements related to vitamin price-fixing litigation and an unrealized hedging gain of $6.3 million. Sales for the quarter were $1.4 billion, up 2.9% over the second quarter of 2001, this increase was driven primarily by the additional sales resulting from the company's acquisition of Purina Mills, Inc. last October.

Year-to-date, the company is reporting sales of $2.9 billion, up 6.8% over one year ago, and $47.3 million in net earnings, down from $57.2 million for the first two quarters of 2001. Company officials indicated key elements in the earnings decline included ongoing competitive pressures on Upper Midwest dairy manufacturing operations, costs related to the start-up of the Cheese & Protein International (CPI) joint venture, and commodity price declines in the feed, egg, and swine industries.

Dairy Foods

Land O'Lakes reported a $5.4 million second quarter pretax loss in Dairy Foods, as compared to $12.7 million in pretax earnings for the second quarter of 2001. Year-to-date, Land O'Lakes is reporting a $9.3 million pretax loss in its Dairy Foods operations.

Company officers indicated key factors in the earnings decline were the impact of continuing competitive pressure on Upper Midwest Industrial (manufacturing) operations, retail pricing issues and costs related to the CPI start-up.

Despite this environment, Land O'Lakes did report $5.0 million in second quarter pretax earnings in its Dairy Foods Value-Added operations, driven in part by increased volume in its retail cheese and foodservice cheese categories. 

On the Industrial side of its Dairy Foods business, the company reported a $10.4 million loss for the quarter, as compared to $5.5 million in pretax earnings for the second quarter of 2001.

Upper Midwest manufacturing operations reported an $8.4 million loss for the quarter. Land O'Lakes officials said the loss was due primarily to the impact of declining milk production and charges related to restructuring efforts in the region. Industrial earnings were also affected by $7.1 million loss related to the start-up of Cheese & Protein International LLC, the company's world-class, joint venture (with Mitsui of Japan) West Coast cheese and whey processing facility, as well as depressed mozzarella and whey markets industry-wide.

Feed

Land O'Lakes Feed reported $29.4 million in pretax earnings for the second quarter, which included $31.9 million in proceeds from various litigation settlements related to alleged price-fixing by certain vitamin product suppliers.

Without the settlements, Feed would have reported a $2.5 million pretax loss for the quarter, as compared to $7.3 million in pretax earnings for the second quarter of 2001. Year-to-date, Feed is reporting $32.8 million in pretax earnings, up from $9.5 million one year ago. Without the vitamin settlement, year-to-date pretax earnings would be $1.0 million. Company officers indicated year-to-date Feed earnings were impacted by a combination of $10.0 million  in one-time restructuring and integration costs related to the Purina Mills acquisition and the effect of unseasonably warm weather on livestock feed volumes.

This shortfall was partially offset by the realization of synergies and cost-savings related to the Purina Mills acquisition. Year-to-date, Land O'Lakes Feed operations have realized approximately $31 million in annualized synergies and the company continued to make progress toward the anticipated $50 million in synergies.

Land O'Lakes year-to-date pretax earnings in Feed are $32.9 million.

Seed

In Seed, Land O'Lakes reported $3.4 million in pretax earnings, as compared to $2.8 million for the second quarter of 2001. Year-to-date, pretax earnings in Seed are $14.5 million, as compared to $17.1 million one year ago. The primary reason for the first half decline is an aggressive 2001 fourth quarter marketing and shipping program that brought considerable volume and gross margins (that traditionally would have been realized in the first quarter of 2002) forward into the final quarter of 2001.

Agronomy

Land O'Lakes conducts its Agronomy business through Agriliance, a joint venture in which the company holds 50 percent ownership. For the quarter, Agronomy operations contributed $41.0 million in pretax earnings, following a $15.4 million first quarter loss (due in part to adverse weather conditions). In the second quarter of 2001, the company recorded $29.5 million in pretax earnings. Year-to-date, pretax Agronomy earnings stand at $25.6 million, as compared to $17.3 million one year ago.

Land O'Lakes is a national, farmer-owned food and agricultural cooperative, with sales of $6 billion. Land O'Lakes does business in all fifty states and more than fifty countries. It is a leading marketer of a full line of dairy-based consumer, foodservice and food ingredient products across the U.S.; serves its international customers with a variety of food and animal feed ingredients; and provides farmers and local cooperatives with an extensive line of agricultural supplies (feed, seed, crop nutrients and crop protection products) and services.