Arden Hills, Minnesota
February 4, 2003

Land O'Lakes today reported 2002 net earnings of $98.9 million, as compared to $71.5 million for 2001. Company officials indicated year-end earnings were driven primarily by proceeds received from vitamin price-fixing litigation settlements and bottom line contributions from the company's Dairy Foods and Ag Services branded and proprietary value-added business segments.

The company continued to pay down debt in 2002 and, at year-end, total long-term debt (including current portion) was down by $55 million. The company's Long-Term-Debt to Capital ratio improved to 51.1 percent, as compared 56.1 percent at the end of 2001.

The company's liquidity position was also strong, with $64 million in cash balances and $320 million of unused borrowing capacity at year-end. In addition, the company is in compliance with all of its financing covenants.

For the fourth quarter, the company reported net earnings of $63.6 million, as compared to $18.7 million for the fourth quarter of 2001. Again, proceeds from vitamin price-fixing settlements and value-added earnings were the primary contributors.

Company officials indicated that commodity price declines; continued competitive pressures and milk supply/processing demand issues facing its Upper Midwest Dairy operations; and costs related to the start-up of its West Coast Cheese and Protein International (CPI) venture adversely affected operating earnings.

Sales for the fourth quarter were $1.5 billion, down 9 percent from fourth quarter 2001, primarily the result of depressed commodity markets in swine, dairy and feed. For the year, sales were basically flat at $5.8 billion.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the quarter were $178.3 million, as calculated under the company's bond indenture. For the year, bond EBITDA was $314.5 million, which includes $155.5 million related to the vitamin litigation settlements.

Dairy Foods

Land O'Lakes reported a $16.7 million pretax loss in Dairy Foods for the quarter and a $32.1 million loss for the year. This compares to fourth quarter earnings of $28.6 million and year-end earnings of $50.7 million in 2001.

For the year, Land O'Lakes reported $47.3 million in pretax earnings on its Dairy Foods Value-Added operations, which was offset by $79.4 million in pretax losses on the Industrial side of the business. On the Value-Added side, Retail, Deli and Foodservice operations made significant contributions.

Losses on the Industrial side were driven primarily by slumping commodity prices (cheese, whey, nonfat dry milk); milk supply/processing demand balance issues in the Upper Midwest; and the impact of higher than anticipated costs and slumping mozzarella markets on CPI. They included $20 million in charges related to plant shutdowns and $30 million in losses related to the CPI start-up. Company officials outlined a number of initiatives in response to these performance issues including:

• the consolidation of production and closing of the company's Perham and Faribault, Minnesota, plants;
• the planned 2003 closing of its Volga, South Dakota, plant; and
• intensified efforts to successfully complete the CPI start-up.

Company officials indicated they anticipate stronger dairy volumes and enhanced brand-driven earnings in 2003.

Feed

Feed reported year-end pretax earnings of $156.5 million, as compared to $24.7 million in 2001. For the quarter, Feed achieved $117.7 million in pretax earnings, as compared to $9.4 million for the same quarter of 2001. Company officials indicated proceeds from vitamin price-fixing litigation settlements contributed significantly to Feed earnings. Excluding gains related to the vitamin settlements and one-time restructuring and integration costs, Feed generated approximately $28 million in operating earnings for the year.

The integration of Purina Mills continued to progress well. In the first full year of a disciplined, three-year integration process, Feed generated $46 million in annualized synergies and $35 million in 2002 cost-savings. Those savings were partly offset by $27 million in one-time restructuring and integration costs.

For the year, weather, markets, and swine and dairy industry restructuring contributed to an 8 percent decline in livestock feed sales. Branded and proprietary feed products did well, led by record animal milk replacer sales and a 1 percent increase in lifestyle feed volumes.

Seed

In Seed, Land O'Lakes reported a $1.7 million loss for the quarter and $8.3 million in earnings for the year. This compares with a loss of $3.5 million for the fourth quarter of 2001, and pretax earnings of $3.6 million for the year.

Agronomy

Land O'Lakes conducts the majority of its agronomy business through the Agriliance joint venture, in which the company holds a 50 percent ownership position. For the quarter, the Agronomy segment reported a pre-tax loss of $18.2 million, versus a loss of $5.4 million for the fourth quarter of 2001. The company reported a $1.8 million loss in Agronomy for the year, as compared to $10.3 million in pretax earnings one year ago. These results included $2.7 million in impairment charges related to Agriliance's southern retail operations.

Swine

Slumping hog markets (averaging approximately $36 per hundredweight in 2002 vs. $47 per hundredweight in 2001) contributed to a $11.9 million fourth quarter pretax loss in Swine, as compared to a $1.2 million loss in the fourth quarter of 2001. For the year, the company reported a $23.2 million pretax loss in swine, as compared to earnings of $3.1 million in 2001.

Company officials indicated progress is being made on efforts to reduce capital usage and exposure to market risk in this business segment.

Land O'Lakes is a national, farmer-owned food and agricultural cooperative, with annual sales of $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.