Land O'Lakes, Inc. today reported its third quarter and year-to-date financial results, while also commenting on individual business unit performance and progress against key strategic initiatives.

Year-to-date, sales are $4.4 billion with net earnings of $42.9 million, compared to sales of $4.3 billion and net earnings of $35.3 million in the first nine months of 2002. For the third quarter, traditionally the company's weakest, Land O'Lakes is reporting $1.58 billion in sales and a net loss of $1.4 million, compared to $1.4 billion in sales and a net loss of $12.0 million in 2002.

Bond EBITDA for the third quarter was $30.6 million, versus $35.4 million in the third quarter of 2002. For the first nine months of 2003, Bond EBITDA was $116.1 million, versus $136.2 million last year. Excluding litigation settlements, the year-to-date 2003 Bond EBITDA was $93.6 million, down 5.8% versus the 2002 Bond EBITDA of $99.4 million for the first three quarters, before settlements. The company indicated that it was lowering its full-year Bond EBITDA forecast from $230 million to $210 million.

Land O'Lakes reported progress against its key strategic initiatives.

Strategic Initiatives

Land O'Lakes continues to report progress in paying down debt, portfolio management and the building of its branded businesses.

Paying down debt. Land O'Lakes paid down term debt by $25 million during the third quarter and made another $16 million payment in October. Year-to- date, principal payments on the company's term debt have totaled $121 million. As Land O'Lakes closed the third quarter, its long-term debt to capital ratio was 3 percentage points better than one year ago.

The company maintained strong liquidity, ending the quarter with a combination of cash-on-hand and unused borrowing authority totaling more than $225 million. Land O'Lakes remained in compliance with all its financing covenants.

Growing Branded Businesses. Land O'Lakes completed the roll out of two new Dairy Foods products -- LAND O LAKES Spreadable Butter with Canola Oil and LAND O LAKES Soft Baking Butter with Canola Oil. Consumer acceptance of these soft-from-the-refrigerator products has been strong and sales are running ahead of forecasts. Land O'Lakes also continues to build on the strength of its brands in Deli Cheese, where branded volume was up 3%.

In Ag Services, Land O'Lakes CROPLAN GENETICS brand is helping drive a record year in seed; sales for the AgriSolutions-branded crop protection product line are up nearly 30% over a year ago; and the company's feed brands (LAND O LAKES and Purina) remain formidable assets.

Proactive Portfolio Management. Land O'Lakes continued efforts to reduce its invested capital and exposure to market risk in Swine. Year-to-date, volume in Farrow-to-Finish and higher-risk Swine Programs was down 12%.

The company is continuing efforts to reposition underperforming manufacturing assets in the Upper Midwest. Land O'Lakes completed the sale of its Perham, Minn., plant and will close its Volga, S.D., plant once Davisco Foods International's new cheese manufacturing facility in Lake Norden, S.D., is fully operational. Land O'Lakes has a milk supply and cheese marketing agreement with Davisco in place.

Dairy Foods

Dairy Foods is reporting a pretax loss of $19.0 million dollars through September, as compared to a loss of $15.4 million over the first three quarters of 2002. Dairy Food sales through September were $2.1 billion, down about 3% from one year ago.

Dairy Foods Value Added operations achieved $21.7 million in pretax earnings through September, as compared to $23.5 one year ago. Year-to-date volumes for retail butter and spreads, driven by the strength of the LAND O LAKES brand, were up 3.3% versus 2002. In Deli, overall volumes were down 4%, while volume in higher-margin, branded Deli Cheese lines was up 3%. Through September, total cheese volume was about 2% behind one year ago, with a significant decline in retail cheese volumes being offset by volume increases in foodservice cheese.

Overall Foodservice volume was up about 4.5%, driven primarily by strong sales in the school and casual and mid-scale restaurant channels.

Despite recent market improvements, Land O'Lakes continues to face significant challenges in its Dairy Foods Industrial (manufacturing) operations. Industrial is reporting a year-to-date pretax loss of $40.6 million, as compared to a $38.9 million loss in 2002. While there have been recent improvements in dairy markets, year-to-date average milk, butter, whey and nonfat dry milk prices still remain below the first three quarters of 2002, while cheese prices are up about 6.5%.

Finally, the allocation of additional staff and resources to resolve performance issues at Cheese and Protein International (CPI), the company's world-class cheese production plant in Tulare, Calif., is showing results. Early packaging issues have been resolved, and customer approval rates and make allowances in both cheese and whey have shown improvement. Land O'Lakes continues to position CPI for the scheduled Phase II expansion, which should significantly reduce per-unit costs.

Feed

Feed sales through September were $1.8 billion, and remain basically even with one year ago. Feed's year-to-date pretax earnings of $25.0 million, were down from $38.8 million through September of 2002. However, the 2002 earnings included $35.9 million in vitamin litigation settlement revenues, as compared to $22.4 million in litigation settlements over the first three quarters of this year. Factoring out litigation settlements, 2003 pretax earnings in Feed are running approximately even with 2002.

Feed's livestock volumes are down 12% through September, with swine feed down 17% and dairy feed down 10%. Depressed dairy and swine markets have been key factors in volume declines. In the beef feed area, volume is up 3% year- to-date and 6% for the third quarter. Overall, lifestyle feed is down 4%, primarily due to a 12% decline in grass cattle feed volumes. The company realized growth in other lifestyle feed segments including companion animal feed, with volume up 2% for the year, and horse feed, with volume up 6% through September.

Swine

Year-to-date, swine prices averaged $41.44/cwt, compared to $37.15/cwt for the same period one year ago. As a result, the company is reporting a $6.7 million loss in Swine through September, as compared to an $11.3 million loss over the same period last year.

Layers/Eggs

MoArk, the joint venture through which Land O'Lakes participates in the egg market, continues to deliver improved performance -- reflecting stronger egg prices over the first three quarters of 2003. The egg business generated $9.2 million in earnings, as compared to a loss of $12.8 million over the same period last year. Also contributing to this improved performance was approximately $4 million in growth-related synergies and cost-saving initiatives.

Dollar sales in eggs totaled $377 million through September, up 13% from one year ago. LAND O LAKES-branded eggs continued to perform well, with sales of 3.2 million dozen through September, a 23% increase over one year ago.

Seed

Seed is reporting $13.9 million in earnings through the third quarter, as compared to $10.0 million through the third quarter of 2002. Seed sales volumes through September are up 32% in corn, 27% in soybeans and 10% in alfalfa.

Agronomy

Land O'Lakes is reporting $27.8 million in pretax earnings in Agronomy through September, generated primarily through its 50% ownership in the Agriliance joint venture. These earnings are up from $16.5 million one year ago. Notably, Agriliance (which operates on a September 1-August 31 fiscal year) has reported increased earnings for three consecutive years.

Land O'Lakes is a national, farmer-owned food and agricultural cooperative, with annual sales of approximately $6 billion. Land O'Lakes 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 local cooperatives with an extensive line of agricultural supplies (feed, seed, crop nutrients and crop protection products) and services.