UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~May 29~~November 27, 2005

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 333-111710

United Agri Products, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		47-0621017
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
(State or Other Jurisdiction ofIncorporation or Organization)		(I.R.S. Employer Identification No.)
7251 W. 4th Street, Greeley, Colorado		80634
(Address of Principal Executive Offices)		(Zip Code)

7251 W. 4th Street, Greeley, Colorado		80634
(Address of Principal Executive Offices)		(Zip Code)

(970) 356-4400

(Registrant’s Telephone Number, Including Area Code)

Not applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the ~~company~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~company~~registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the ~~company~~registrant is a large accelerated filer, an accelerated filer, ~~(as~~or ~~defined~~a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act).

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

Class		Outstanding at ~~July~~January 65, ~~2005~~2006
Common Stock, par value $1.00 per share		1,000 shares

TABLE OF CONTENTS

Part I. Financial Information		3
ITEM 1. FINANCIAL STATEMENTS		3
Report of Independent Registered Public Accounting Firm		3
Condensed Consolidated Balance Sheets		4
Condensed Consolidated Statements of Earnings		5
Condensed Consolidated Statements of Cash Flows		6
Condensed Consolidated Statement of Stockholder’s Equity		7
Notes to Condensed Consolidated Financial Statements		8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		2224
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		2933
ITEM 4. CONTROLS AND PROCEDURES		2934
Part II. Other Information		3035
ITEM 6. EXHIBITS		3035
SIGNATURES		3136

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder of United Agri Products, Inc.

Greeley, Colorado

We have reviewed the accompanying condensed consolidated balance sheets of United Agri Products, Inc. and subsidiaries (the “Company”) as of ~~May 29~~November 27, 2005 and ~~May 30~~November 28, 2004, the related condensed consolidated statements of earnings for the 13-week and 39-week periods ended November 27, 2005 and the 13-week and 40-week periods ended November 28, 2004, the condensed consolidated statements of cash flows for the 1339-week period ended ~~May 29~~November 27, 2005 and the 1440-week period ended ~~May 30~~November 28, 2004, and the condensed consolidated statement of stockholder’s equity for the ~~thirteen~~ 39-week period ended ~~May 29~~November 27, 2005. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of United Agri Products, Inc. and subsidiaries as of February 27, 2005, and the related consolidated statements of earnings, stockholder’s equity, and cash flows for the year then ended (not presented herein) and in our report dated May 27, 2005, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of February 27, 2005 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

DELOITTE & TOUCHE LLP

Denver, Colorado

~~July 5~~January 9, ~~2005~~2006

UNITED AGRI PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

UNAUDITED

	May 29,2005			February 27,2005			May 30,2004
	November 27,2005			February 27,2005			November 28,2004
ASSETS
Current assets:
Cash and cash equivalents	$	1513,~~730~~922		$	48,201		$	266,~~593~~694
Receivables, less allowance for doubtful accounts of $15,524, $13,749 and $27,881		1,008,861			235,175			896,057
Receivables, less allowance for doubtful accounts of $16,119, $13,749 and $20,003		616,670			235,175			531,171
Inventories		~~681~~536,~~913~~641			697,134			~~594~~490,~~079~~649
Deferred income taxes		2124,~~223~~631			17,263			327,~~103~~228
Vendor prepay		3322,~~360~~056			149,010			32,~~243~~957
Other current assets		54,~~016~~383			7,310			10,~~489~~715
Total current assets		1,~~766~~218,~~103~~303			1,154,093			1,~~562~~099,~~564~~414
Property, plant and equipment		~~107~~114,~~414~~303			104,745			~~102~~100,~~607~~681
Less accumulated depreciation		(1723,~~876~~345	)		(15,080	)		(512,~~442~~209	)
Property, plant and equipment, net		8990,~~538~~958			89,665			9788,~~165~~472
Goodwill		3432,~~645~~431			34,645			4327,~~465~~873
Intangible assets, net		2524,~~561~~897			25,894			629,~~705~~527
Deferred income taxes		1,~~196~~444			1,563			~~6,605~~—
Debt issue costs, net		1614,~~767~~811			17,107			19,~~247~~198
Investment in unconsolidated affiliates		3,~~360~~666			4,071			34,~~050~~301
Other assets		~~643~~466			506			~~(1,039~~653	)
Total assets	$	1,~~937~~386,~~813~~976		$	1,327,544		$	1,~~737~~269,~~762~~438
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Short-term debt	$	—148,965		$	55		$	42211,~~123~~556
Intercompany borrowings		3135,~~039~~420			25,287			~~(133~~3,810	)
Accounts payable		1630,~~217,686~~185			822,864			~~996~~529,~~143~~602
Other accrued liabilities		~~205~~108,~~269~~071			72,686			~~235~~114,~~396~~354
Income taxes payable		3514,~~379~~649			3,252			64,~~517~~146
Deferred income taxes		~~108~~1,580			108			~~8,709~~46
Total current liabilities		1938,~~489,481~~870			924,252			1863,~~288,755~~514
Long-term debt		203,500			203,500			225,000
Other non-current liabilities		32,~~645~~753			2,871			52,~~646~~644
Deferred income taxes		2319,~~156~~884			23,590			~~264~~17,602
Commitments and contingencies (note 8)
Stockholder’s equity:
Common stock, $1.00 par value, 100,000 shares authorized, 1,000, issued and outstanding for each date presented		1			1			1
Additional paid-in capital		175,842			175,842			~~179~~175,~~999~~842
Retained (deficit) earnings		39,310			(5,802	)		38,699
Retained earnings (deficit)		40,898			(5,802	)		(19,836	)
Accumulated other comprehensive income (loss)		2,878			3,290			(602	)
Accumulated other comprehensive income		5,228			3,290			4,671
Stockholder’s equity		~~218~~221,~~031~~969			173,331			~~218~~160,~~097~~678
Total liabilities and stockholder’s equity	$	1,~~937~~386,~~813~~976		$	1,327,544		$	1,~~737~~269,~~762~~438

The accompanying notes are an integral part of the condensed consolidated financial statements.

UNITED AGRI PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in thousands, except ~~earnings per~~ share ~~amounts~~data)

UNAUDITED

	Thirteen Weeks Ended May 29, 2005			Fourteen Weeks Ended May 30, 2004
	Thirteen Weeks Ended						Thirty-NineWeeks EndedNovember 27, 2005			FortyWeeks EndedNovember 28,2004
Net sales	$	1,356,910		$	1,258,489
	November 27,2005			November 28,2004
Costs and expenses:
Net sales	$	323,089		$	267,157		$	2,437,458		$	2,229,627
Cost of goods sold		1,188,158			1,122,755
Costs and expenses:
Gross profit		168,752			135,734
Cost of goods sold		272,547			249,835			2,107,891			1,969,549
Selling, general and administrative expenses		85,623			82,811
Gross profit		50,542			17,322			329,567			260,078
Gain on sale of assets		(18	)		(572	)
Selling, general and administrative expenses		55,810			47,866			214,142			200,985
Royalties, service charges and other income and expenses		(7,784	)		(2,673	)
(Gain) loss on sale of assets		(59	)		642			(1,532	)		(623	)
Operating income		90,931			56,168
Restructuring costs		970			857			1,460			857
Third party interest expense		5,725			8,428
Royalties, service charges and other (income) and expenses		(2,915	)		(6,073	)		(20,739	)		(18,847	)
Finance related and other charges		—			1,875
Operating income (loss)		(3,264	)		(25,970	)		136,236			77,706
Income before income taxes		85,206			45,865
Third party interest expense		8,279			8,714			20,393			24,943
Income tax expense		33,789			17,957
Finance related and other charges		—			7,903			—			11,653
Net income	$	51,417		$	27,908
Income (loss) before income taxes		(11,543	)		(42,587	)		115,843			41,110
Earnings per share:
Income tax expense (benefit)		(4,067	)		(16,580	)		46,435			15,894
Basic	$	51,417.39		$	27,908.00
Net income (loss)	$	(7,476	)	$	(26,007	)	$	69,408		$	25,216
Diluted	$	51,417.39		$	27,908.00
Weighted average shares outstanding:
Basic		1,000			1,000
Diluted		1,000			1,000

The accompanying notes are an integral part of the condensed consolidated financial statements.

UNITED AGRI PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

UNAUDITED

	Thirteen Weeks Ended May 29, 2005			Fourteen Weeks Ended May 30, 2004
	Thirty-Nine Weeks Ended November 27,2005			FortyWeeks EndedNovember 28,2004
Operations
Net income	$	5169,~~417~~408		$	2725,~~908~~216
Adjustments to reconcile net income to net cash used for operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		28,~~845~~519			39,~~501~~541
Amortization of intangibles		~~332~~997			~~365~~1,145
Amortization of debt issuance costs		~~991~~2,945			~~827~~2,532
Gain on sales of fixed assets		(181,532	)		(~~572~~623	)
Deferred tax provision (benefit)		(49,~~025~~482	)		112,~~039~~194
Stock compensation		173			—
Change in operating assets and liabilities:		(250,290	)		(313,674	)
Change in operating assets and liabilities:		(110,606	)		(247,824	)
Net cash provided by (used in) operations		(179,435	)		(273,669	)
Net cash used in operations		(58,891	)		(204,756	)
Investing
Additions to property, plant and equipment		(3,215	)		(3,890	)
Acquisition payment to ConAgra Foods, Inc.		—			(58,236	)
Proceeds from sales of assets		381			857
Additions to property, plant and equipment		(10,226	)		(9,362	)
Investment in unconsolidated affiliates		711			908
Proceeds from sales of assets		2,184			3,246
Net cash used in investing activities		(2,123	)		(2,125	)
Other		405			(343	)
Net cash used in investing activities		(7,637	)		(64,695	)
Financing
Check float on zero balance accounts		238,~~621~~143			1916,~~437~~841
Net borrowings of short-term debt		(55	)		42,204
Net borrowings (repayments) of short-term debt		148,910			211,556
Debt issuance costs		(650	)		—
Due to (from) UAP Holding Corp.		5,752			(133	)
Due to UAP Holding Corp.		10,134			—
Net cash provided by financing activities		28,668			61,508
Dividends paid		(14,505	)		(60,000	)
Net change in cash and cash equivalents		(32,346	)		(145,373	)
Net cash provided by financing activities		152,032			168,397
Net effect of exchange rates on cash and cash equivalents		(125	)		(19	)
Net change in cash and cash equivalents		(35,040	)		(169,967	)
Net change in cash and cash equivalents		(32,471	)		(145,392	)
Net effect of exchange rates on cash and cash equivalents		761			4,676
Net change in cash and cash equivalents		(34,279	)		(165,291	)
Cash and cash equivalents at beginning of period		48,201			171,985
Cash and cash equivalents at end of period	$	1513,~~730~~922		$	266,~~593~~694
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	~~797~~13,597		$	~~800~~17,162
Net cash (refunded) paid during the period for income taxes	$	(5,291	)	$	631
Net cash paid during the period for income taxes on behalf of parent	$	31,088		$	20,877
Dividend declared and payable to parent	$	68,~~305~~203		$	—

The accompanying notes are an integral part of the condensed consolidated financial statements.

UNITED AGRI PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY

(dollars in thousands)

UNAUDITED

	Common Stock		AdditionalPaid inCapital		RetainedEarnings			AccumulatedOtherComprehensiveIncome				TotalStockholder’sEquity
Thirty-Nine Weeks Ended November 27, 2005	CommonStock		AdditionalPaid inCapital		RetainedEarnings			AccumulatedOtherComprehensiveIncome			TotalStockholder’sEquity
Thirteen Weeks Ended May 29, 2005
Balance at February 27, 2005	$	1	$	175,842	$	(5,802	)	$	3,290		$	173,331
Balance at February 27, 2005	$	1	$	175,842	$	(5,802	)	$	3,290			$	173,331
Dividends to stockholder		—		—		(22,708	)		—			(22,708	)
Dividends to stockholder		—		—		(6,305	)		—				(6,305	)
Comprehensive income:
Comprehensive income:
Net income		—		—		69,408			—			69,408
Net income		—		—		51,417			—				51,417
Foreign currency translation adjustment		—		—		—			1,938			1,938
Foreign currency translation adjustment		—		—		—			(412	)			(412	)
Balance at November 27, 2005	$	1	$	175,842	$	40,898		$	5,228		$	221,969
Total comprehensive income		—		—		51,417			(412	)			51,005
Balance at May 29, 2005	$	1	$	175,842	$	39,310		$	2,878			$	218,031

The accompanying notes are an integral part of the condensed consolidated financial statements.

UNITED AGRI PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Thirteen and Thirty-Nine Week ~~Period~~Periods Ended ~~May 29~~November 27, 2005 and the ~~Fourteen-Week Period Ended May~~ ~~30,~~Thirteen ~~2004~~and Forty

Week Periods Ended November 28, 2004

UNAUDITED

1.	Description of the Business and Basis of Presentation

Interim Financial Statements. The accompanying unaudited condensed consolidated financial statements of United Agri Products, Inc. (a wholly-owned subsidiary of UAP Holding Corp.) and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and reflect all adjustments (consisting of normal recurring accruals and changes in estimates) which, in the opinion of management, are necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented. These financial statements should be read in conjunction with the consolidated and combined financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended February 27, 2005.

Business. We are the largest distributor of agricultural and non-crop inputs in the United States and Canada. We market a comprehensive line of products including chemicals, seed and fertilizer to growers and regional dealers. We have approximately 330 general distribution centers and sales locations. We also have three formulation facilities where we blend products primarily for sale by our distribution facilities.

On November 24, 2003, Apollo Management, L.P. (“Apollo”), UAP Holding Corp. and ConAgra Foods consummated a transaction in which UAP Holding Corp. acquired ConAgra Foods’ United States and Canadian Agricultural Products Businesses, excluding its wholesale fertilizer and other international crop distribution businesses, which we refer to as the “Acquisition.” On November 29, 2004, UAP Holding Corp. consummated the initial public offering of its common stock, (the “Common Stock Offering”), which is traded under the symbol “UAPH” on the NASDAQ National Market.

Principles of Consolidation. The consolidated financial statements include our accounts and the accounts of all our wholly-owned subsidiaries. Significant intercompany balances and transactions have been eliminated. Investments in 50% or less owned affiliates over which we do not have the ability to exercise significant control are accounted for using the equity method. ~~During the reported periods, we did not have any “less than 20% owned” investments in affiliates accounted for under the equity method.~~

Fiscal Year. Our fiscal year operates on a 52- or 53-week period ending on the last Sunday in February. Our fiscal year 2006 contains 52 weeks while our fiscal year 2005 contained 53 weeks. The additional week in fiscal year 2005 was included in the first quarter.

Seasonality. Our and our customers’ businesses are seasonal, based upon the planting, growing, and harvesting cycles. Typically ~~During fiscal 2005 and 2004,~~ at least 75% of our net sales ~~occurred~~occur during the first and second fiscal quarters of each year because of the condensed nature of the planting season. As a result of the seasonality of sales, we experience significant fluctuations in our revenues, income and net working capital levels. In addition, weather conditions can significantly vary quarterly results.

Since our suppliers typically operate on a crop year, which is a different year than our fiscal year, our rebate agreements with our suppliers are estimated throughout our ~~the~~fiscal year and adjusted, as necessary, typically in our third or fourth fiscal quarter. These estimates can impact our margin percentages by quarter. Also, our receivables are seasonal since customers operate on a crop year and payments are cyclical throughout the year. Accordingly, our results of operations over any one -quarter are not necessarily indicative of the results to be expected over the full fiscal year.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates or assumptions affect reported amounts of assets, liabilities, revenue and expenses as reflected in the financial statements. Actual results could differ from those estimates and the differences could be material. The most significant estimate reflected in the Company’s financial statements is the accrual for vendor rebates. Estimates are also required in accounting for the allowance for doubtful accounts, inventory reserves, asset retirement obligations, restructuring charges, sales returns, insurance reserves, income taxes and other items.

~~Earnings~~Vendor ~~Per~~Rebates ~~Share~~Receivable. ~~Earnings~~At ~~per~~the ~~share~~beginning ~~are~~of ~~based~~each oncrop ~~the~~year, ~~weighted~~we ~~average~~enter ~~number~~into ofagreements ~~shares~~with many of ~~common~~our ~~stock~~suppliers ~~outstanding during~~providing for vendor rebates upon the ~~period~~achievement of specified volume purchasing or sales levels. ~~For~~Most ~~the~~of ~~thirteen~~these ~~weeks~~rebates ~~ended~~are ~~May~~covered ~~29,~~by ~~2005,~~binding ~~and~~arrangements ~~the~~or ~~fourteen~~published ~~weeks~~programs. ~~ended~~Such ~~May~~rebates ~~30,~~that are probable and reasonably estimable are

~~2004,~~accrued at expected rates based on total estimated crop year performance. Such rebates that are not probable or estimable are accrued when certain milestones are actually achieved. We also receive rebates not covered by binding agreements or published vendor programs as part of negotiations with suppliers after the ~~weighted~~end ~~average~~of ~~number~~the crop year. These rebates are accrued when conclusive documentation of ~~shares~~right ~~outstanding~~of receipt ~~for~~is ~~both~~obtained. Rebates based on the ~~basic~~amount ~~and~~of ~~diluted~~materials ~~earnings~~purchased ~~per~~are ~~share~~offset ~~calculation~~to ~~was~~cost ~~1,000~~of goods sold as inventory is depleted. Rebates that are based on the amount of sales volume are offset to cost of goods sold when earned.

	Thirteen WeeksEnded May 29, 2005		Fourteen WeeksEnded May 30, 2004
	(dollars in thousands, except earningsper share amounts)
Earnings per share
Net income	$	51,417	$	27,908
Weighted average shares of common stock outstanding used in computing basic earnings per share		1,000		1,000
Weighted average shares of common stock used in computing diluted earnings per share		1,000		1,000
Basic and diluted earnings per share	$	51,417.39	$	27,908.00

Due to the nature of rebate programs, estimates of rebates earned can vary significantly from period to period, and when comparing comparable periods of the current and prior year, and more likely than not will trail sales. Due to a combination of factors as compared to last year - changes in vendor programs, the Company’s new rebate tracking system, and improvements in operating performance that have led to greater probability of achieving higher rebate levels – the Company has accrued more rebate earnings in and through the third quarter of 2006 as compared to the same periods of 2005.

~~Stock~~Earnings ~~Based Compensation.~~Per ~~We account for employee stock option plans in accordance with Accounting Principles Board Opinion No 25, “Accounting for Stock Issued to Employees~~Share.” ~~Accordingly,~~Earnings noper ~~stock~~share information ~~based compensation expense~~ is ~~reflected in~~not ~~net income~~presented, as ~~options granted under these plans have an exercise price equal to~~ the ~~market~~Company ~~value~~is ofa ~~the~~wholly ~~underlying~~owned ~~common~~subsidiary ~~stock on the date~~ of ~~the~~UAP ~~grant~~Holding Corp.

~~The~~Stock ~~impact~~Based onCompensation. Certain of our ~~net~~employees ~~income~~participate ifin weUAP ~~complied~~Holding Corp’s stock option plan. We account for employee stock option plans in accordance with ~~SFAS~~Accounting Principles Board Opinion No. ~~123R~~25, “~~Share-Based~~Accounting ~~Payment~~for Stock Issued to Employees.” ~~would~~Accordingly, beno stock based compensation expense is reflected in net income, as ~~follows:~~options granted under these plans have an exercise price equal to the market value of the underlying common stock on the date of the grant.

	Thirteen WeeksEnded May 29, 2005		Fourteen WeeksEndedMay 30, 2004
	(dollars in thousands, except earningsper share amounts)
Stock-Based Compensation
Net income as reported	$	51,417	$	27,908
Less: Total stock-based employee compensation expense determined under fair-value-based method for all awards, net of tax		12		36
Pro forma net income	$	51,405	$	27,872
Basic and diluted earnings per share:
As reported	$	51,417.39	$	27,908.00
Pro forma	$	51,405.51	$	27,872.00

The impact on our net income if we applied the fair value measurement provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock Share-Based Compensation Payment” would be as follows:

Reclassifications. Certain prior period amounts in the consolidated financial statements have been reclassified to conform to current period presentation. These reclassifications had no net impact on previously reported results of operations. We reclassed royalties, service charges, other income and expenses and finance related and other charges which were previously included in other income and selling, general and administrative expenses.


Stock-Based Compensation	Thirteen Weeks Ended						Thirty-Nine Weeks Ended November 27, 2005			Forty Weeks Ended November 28, 2004
Stock-Based Compensation	November 27, 2005			November 28, 2004			Thirty-Nine Weeks Ended November 27, 2005			Forty Weeks Ended November 28, 2004
	(dollars in thousands)
Net income (loss) as reported	$	(7,476	)	$	(26,007	)	$	69,408		$	25,216
Add: Stock-based employee compensation included in reported net income, net of tax		128			—			351			565
Less: Total stock-based employee compensation expense determined under fair-value-based method for all awards, net of tax		(127	)		(36	)		(374	)		(672	)

Pro forma net income (loss)	$	(7,475	)	$	(26,043	)	$	69,385		$	25,109

Reclassifications. Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform to current period presentation. These reclassifications had no net impact on previously reported results of operations. We reclassified royalties, service charges, other income and expenses and finance related and other charges which were previously included in other income and selling, general and administrative expenses. We reclassified restructuring costs that were previously included in cost of goods sold and selling general and administrative expense. We also segregated vendor prepay from other current assets.

2.	Royalties, Service Charges and Other Income and Expenses

The table below details ~~thirteen~~royalties, ~~weeks~~service ~~ended~~charges ~~May~~and ~~29,~~other ~~2005,~~income and ~~the~~expenses. ~~fourteen weeks ended May 30, 2004:~~

	Thirteen WeeksEndedMay 29, 2005			Fourteen WeeksEndedMay 30, 2004
Royalties, service charges and other income and expenses	Thirteen Weeks Ended						Thirty-Nine Weeks Ended November 27, 2005			Forty Weeks Ended November 28, 2004
	(dollars in thousands)
	November 27, 2005			November 28, 2004
Royalties, service charges and other income and expenses
	(dollars in thousands)
Royalty income	$	(4,625	)	$	(2,097	)
Royalty (income)	$	(200	)	$	(2,060	)	$	(9,154	)	$	(7,207	)
Service charge income		(1,396	)		(971	)
Service charge (income)		(1,470	)		(2,704	)		(5,510	)		(6,604	)
Other (income) expenses		(1,763	)		395
Other (income)		(1,245	)		(1,309	)		(6,075	)		(5,036	)
Royalties, service charges and other income and expenses	$	(7,784	)	$	(2,673	)
Royalties, service charges and other (income) and expenses	$	(2,915	)	$	(6,073	)	$	(20,739	)	$	(18,847	)

3.	Finance Related and Other Charges

Finance related and other charges are composed of costs and fees related to the Acquisition, the Common Stock Offering, and related financing activities. For the ~~fourteen~~thirteen and forty weeks ended ~~May 30~~November 28, 2004, these charges consisted of $17.9 million and $11.6 million, respectively, relating to ~~the~~fees ~~non-accountable~~and ~~charges~~expenses ~~paid~~from toan abandoned securities offering and transition service expenses from ConAgra Foods ~~relating~~for to the Acquisition.

4.	Certain Asset Accounts

Receivables and Allowance for Doubtful Accounts. Our receivables include receivables from customers net of allowances for doubtful accounts, vendor rebates receivable, and miscellaneous receivables. As of ~~May 29~~November 27, 2005, February 27, 2005, and ~~May 30~~November 28, 2004, the net receivables from customers were $~~872~~484.23 million, $192.5 million, and $~~772~~406.76 million, respectively, vendor rebates receivable were $~~121~~122.8 0 million, $23.2 million, and $~~102~~91.94 million, respectively, and miscellaneous receivables were $1410.94 million, $19.5 million, and $2033.52 million, respectively. AsThe ofnet ~~May~~receivables ~~29,~~from ~~2005,~~customers ~~February~~include ~~27,~~receivables ~~2005,~~from unconsolidated ~~and~~investees ~~May~~in ~~30, 2004,~~ the ~~allowance~~amounts ~~for~~of ~~doubtful accounts totaled,~~ $152.5 million, $134.70 million, and $275.92 million as of November 27, 2005, February 27, 2005, and November 28, 2004, respectively.

Inventories. Inventories consist primarily of chemicals, ~~fertilizers~~fertilizer, and seed, and are carried at the lower of cost or market. As of ~~May 29~~November 27, 2005, February 27, 2005, and ~~May 30~~November 28, 2004, we had $~~15.~~8.3 million, $25.8 million, and $169.14 million, respectively, of allowances against inventory.

The cost of inventory at distribution locations is carried either at average cost or first in, first out (FIFO). As of ~~May 29~~November 27, 2005, February 27, 2005, and ~~May 30~~November 28, 2004, approximately 3287.43%, 23.5%, and 911.96%, respectively, of inventory was reported on the average cost basis.

Inventories are comprised of the following:

	May 29,2005		February 27,2005		May 30,2004
	November 27, 2005		February 27, 2005		November 28, 2004
	(dollars in thousands)
Product inventories
Raw materials and work in process	$	9,525	$	12,827	$	9,656
Raw materials and work in process	$	9,697	$	12,827	$	10,189
Finished goods		527,116		684,307		480,993
Finished goods		672,216		684,307		583,890
Total	$	536,641	$	697,134	$	490,649
Total	$	681,913	$	697,134	$	594,079

Goodwill. At ~~May~~ 29November 27, 2005, February 27, 2005, and ~~May 30~~November 28, 2004, goodwill totaled $3432.64 million, $34.6 million, and $4327.59 million, respectively, with no amortization. During the third quarter of fiscal 2005, we finalized the Acquisition purchase price allocation with the assistance of a third party valuation of certain intangible assets that had been categorized as goodwill. During the third quarter of fiscal 2006, we reduced goodwill to reflect the benefit of a current period reduction of the deferred tax liability established in the initial acquisition purchase price allocation.

Debt Issuance Costs. Our debt issuance costs net of amortization were $1614.8 million, $17.1 million, and $19.2 million as of ~~May 29~~November 27, 2005, February 27, 2005, and ~~May 30~~November 28, 2004, respectively. Our debt issuance costs consisted of costs associated with our revolving credit facility and the 8¼ 1/4% Senior Notes due 2011 (the “8¼ 1/4% Senior Notes”). Debt issuance costs of $0.6 million were recognized in the ~~thirteen~~first ~~week~~half ~~period~~of ~~ended~~fiscal ~~May 29,~~year ~~2005~~2006, for the exchange offer relating to the 8¼ 1/4% Senior Notes.

5. Costs Associated with Asset Retirement Obligations

We had Asset Retirement Obligations related to SFAS No. 143, “Accounting for Asset Retirement Obligations.”

	As of the thirteenweeks endedMay 29, 2005			As of theyear endedFebruary 27, 2005			As of the fourteenweeks endedMay 30, 2004
	(dollars in thousands)
Asset Retirement Obligations
Beginning balance	$	2,411		$	2,343		$	2,343
Obligations incurred		—			—			—
Obligations settled		—			(74	)		—
Accretion expense		22			115			91
Cash flow revision		(4	)		27			(22	)
Ending Balance	$	2,429		$	2,411		$	2,412

5.	Costs Associated with Restructuring

In the quarter ended November 27, 2005, we began consolidating ten regional distribution centers into five, closing one regional finance center, and centralizing and consolidating various administrative functions. During the second half of fiscal 2005, we began closing two formulating plants. The tables below show the activity related to costs associated with these restructuring activities.


Expenses related to restructuring:	Thirteen Weeks Ended					Thirty-Nine Weeks Ended November 27, 2005		Forty Weeks Ended November 28, 2004
Expenses related to restructuring:	November 27, 2005			November 28, 2004		Thirty-Nine Weeks Ended November 27, 2005		Forty Weeks Ended November 28, 2004
	(dollars in thousands)
Severance expenses	$	841		$	203	$	786	$	203
Contract termination costs		188			—		240		—
Other associated costs		(59	)		654		434		654

Total restructuring expenses	$	970		$	857	$	1,460	$	857

During the thirteen weeks ended November 27, 2005, we completed one formulating plant closure which was begun in fiscal 2005. Remaining accrued obligations of $76 thousand were offset against current quarter restructuring expenses.


Liability balance related to restructuring activities:	November 27, 2005			February 27, 2005			November 28, 2004
	(dollars in thousands)
Beginning fiscal year balance	$	(724	)	$	—		$	—
Additional expense recognized		(1,460	)		(903	)		(858	)
Severance and other expenses settled		1,262			179			—

Total	$	(922	)	$	(724	)	$	(858	)

As of November 27, 2005, we have incurred $1.4 of the estimated $1.5 million of costs for the restructuring activities which began in fiscal year 2005. We have also incurred $1.0 million of the estimated $1.9 million of costs for the restructuring activities which began in fiscal year 2006.

6.	Income Taxes

We file a consolidated return with UAP Holding Corp. IfWe weprovide ~~were~~income totaxes ~~have~~as ~~filed~~if aswe were a stand alone company,. ~~our~~Our income tax provision for the thirteen and thirty-nine weeks ended ~~May 29~~November 27, 2005, and the thirteen ~~fourteen~~and forty weeks ended ~~May 30~~November 28, 2004 ~~would~~ ~~have~~differs ~~been~~from the federal statutory rate as follows:

	Thirteen WeeksEndedMay 29, 2005			Fourteen WeeksEndedMay 30, 2004
	Thirteen Weeks Ended							Thirty-Nine Weeks Ended November 27, 2005			Forty Weeks Ended November 28, 2004
	(dollars in thousands)
	November 27, 2005				November 28, 2004
U.S. federal statutory rate	$	29,822		$	16,053
	(dollars in thousands)
State income taxes		3,775			2,032
U.S. federal statutory rate	$	(4,040	)		$	(14,905	)	$	40,545		$	14,389
Foreign credits and other		192			(128	)
Dividends on shares of stock held in a rabbi trust		—				(745	)		—			(745	)
Total	$	33,789		$	17,957
State income taxes		(76	)			(1,774	)		5,477			1,189
Foreign credits		(306	)			(82	)		(376	)		(82	)
Other		355				926			789			1,143
Total	$	(4,067	)		$	(16,580	)	$	46,435		$	15,894

We file our fiscal year end income tax return during the third quarter. Adjustments of our fiscal 2004 and 2005 income tax provisions, which are based in part on estimates, to the actual filed tax returns were a $0.4 million charge during the three quarters ended November 27, 2005, as compared to a $0.9 million benefit during the three quarters ended November 28, 2004.

The components of our income tax provision are as follows:


Income tax provision (benefit)	Thirteen Weeks Ended						Thirty-Nine Weeks Ended November 27, 2005			Forty Weeks Ended November 28, 2004
Income tax provision (benefit)	November 27, 2005			November 28, 2004			Thirty-Nine Weeks Ended November 27, 2005			Forty Weeks Ended November 28, 2004
	(dollars in thousands)
Current:
U.S. federal	$	431		$	4,763		$	45,745		$	8,918
U.S. state		199			437			6,311			973
Outside United States		385			(316	)		3,826			3,809
Effect of foreign currency exchange on deferred taxes		15			—			35			—

Total current		1,030			4,884			55,917			13,700
Deferred:
U.S. federal		(4,807	)		(19,254	)		(8,613	)		1,978
U.S. state		(275	)		(2,210	)		(834	)		216
Outside United States		—			—			—			—
Effect of foreign currency exchange on deferred taxes		(15	)		—			(35	)		—

Total deferred		(5,097	)		(21,464	)		(9,482	)		2,194

Total	$	(4,067	)	$	(16,580	)	$	46,435		$	15,894

We currently estimate that there will be a foreign tax credit carryover of approximately $0.6 million, $0.2 million of which will expire in fiscal year 2015 and the balance of which will expire in fiscal year 2016. We have posted no valuation allowance against the deferred tax asset for this credit carryover because, based on current projections and tax planning options, we believe it is more likely than not we will utilize these credits before they expire.

Debt

Total current and long-term debt as of ~~May 29~~November 27, 2005, February 27, 2005, and ~~May 30~~November 28, 2004, consisted of the following:

	May 29,2005		February 27,2005		May 30,2004
Total debt	November 27, 2005		February 27, 2005		November 28, 2004
	(dollars in thousands)
Total debt
Revolving credit facility	$	148,965	$	55	$	211,556
Revolving credit facility	$	—	$	55	$	42,123
8 1/4% Senior Notes		203,500		203,500		225,000
8¼% Senior Notes		203,500		203,500		225,000
Total debt		352,465		203,555		436,556
Total		203,500		203,555		267,123
Less: current portion
Revolving credit facility		—148,965		55		42211,~~123~~556
Total long term	$	203,500	$	203,500	$	225,000
Total long-term debt	$	203,500	$	203,500	$	225,000

Our $500.0 million asset based revolving credit facility ~~has a five-year term and~~ will mature in 2008. At May 29, 2005, there was $500.0 million of borrowing availability under the revolving credit facility and we had borrowing capacity thereunder of $475.8 million (after giving effect to $24.2 million of letters of credit under the sub-facility).

~~On December~~At 29November 27, ~~2004~~2005, there was $21486.59 million of ~~the~~borrowing ~~8¼%~~availability ~~Senior~~under ~~Notes were redeemed with proceeds from~~ the ~~Common~~revolving ~~Stock~~credit ~~Offering.~~facility Inand ~~addition,~~ we ~~may~~had ~~redeem~~borrowing ~~some~~capacity orthereunder ~~all~~ of ~~the~~$464.4 ~~remaining~~million ~~8¼%~~(after ~~Senior~~giving ~~Notes~~effect atto a$22.5 ~~redemption~~million ~~price~~of ~~that~~letters ~~may~~of ~~include~~credit ~~a redemption~~under ~~premium~~the ~~and a make~~sub-~~whole premium~~facility).

On December 29, 2004, $21.5 million of the 8¹/4% Senior Notes were redeemed with proceeds from the Common Stock Offering. In addition, we may redeem some or all of the remaining 8¹/4% Senior Notes at a redemption price that may include a redemption premium and a make-whole premium.

8.	Commitments and Contingencies

We are a party to a number of lawsuits and claims arising out of the operation of our businesses. After taking into account liabilities recorded, management believes the ultimate resolution of such matters should not have a material adverse effect on our financial condition, results of operations or liquidity.

9.	Employee Benefit Plans

Management Incentive Program. We have a management incentive plan for key officers and employees, based on growth, profitability, individual performance of each operating center and key performance metrics. Amounts charged to expense totaled $192.32 million and $1929.23 million for the thirteen and thirty-nine weeks ended ~~May 29~~November 27, 2005, respectively, and $0.7 million and $30.6 million for the thirteen ~~fourteen~~and forty weeks ended ~~May 30~~November 28, 2004, respectively.

Retirement Program for Canadian Employees. United Agri Products Canada, Inc., (“UAP Canada”) one of our subsidiaries, currently has two retirement plans for employees of UAP Canada. They are eligible to participate in these plans after completing one year of service. One plan is an optional RRSP/DPSD Defined Contribution plan. UAP Canada matches 50% of an employee’s first 6% of contributions to the plan.

The second plan is a ~~Defined~~defined ~~Benefit~~benefit plan. UAP Canada is responsible for funding this plan and is currently contributing at a rate of 57.9510% of payroll. Benefits are based on years of credited service and average compensation in the last 5 years of service. Components of the UAP Canada pension plan are reported below.

in the last 5 years of service. We assumed the plan assets and obligations of the UAP Canada pension plan as reported under the Predecessor. Components of the UAP Canada pension plan are reported below.

The change in pension benefit costs is as follows:

	Thirteen WeeksEndedMay 29, 2005			Fourteen Weeks Ended May 30, 2004
Pension benefit costs	Thirteen Weeks Ended						Thirty-Nine Weeks Ended November 27, 2005			Forty Weeks Ended November 28, 2004
	(dollars in thousands)
	November 27, 2005			November 28, 2004
Pension benefit costs
	(dollars in thousands)
Service cost for benefits earned during the period	$	6968		$	107		$	231		$	321
Interest cost on benefit obligations		35			51			117			153
Assumed return on plan assets		(28	)		(47	)		(94	)		(140	)
Recognized net actuarial loss		—			—
Total pension benefit costs	$	75		$	111		$	254		$	334
Total pension benefit costs	$	76		$	111

10.

Equity

Stock Options. Certain of our management, directors, and employees participate in UAP Holding Corp.’s stock option plans. The changes in the outstanding stock options under the two stock option plans during the ~~thirteen~~thirty-nine weeks ended ~~May 29~~November 27, 2005, and the ~~fourteen~~forty weeks ended ~~May 30~~November 28, 2004, are summarized below:

	Shares subjectto option		Weighted-averageExerciseprice per share
Stock options	Shares subject to option			Weighted-average Exercise price per share
Stock options
Balance at February 27, 2005	3,359,535			$	2.56
Balance at February 27, 2005	3,359,535		$	2.56
Granted	—
Granted	—
Exercised	(38,977	)		$	2.56
Exercised	—
Forfeited / lapsed	(138,205	)		$	2.56
Forfeited / lapsed	—
Balance at November 27, 2005	3,182,353			$	2.56
Balance at May 29, 2005	3,359,535		$	2.56
Vested at November 27, 2005	2,662,837			$	2.56
Vested at May 29, 2005	2,541,827		$	2.56
Balance at February 22, 2004	2,789,115			$	2.56
Balance at February 22, 2004	2,789,115		$	2.56
Granted	629,047			$	2.56
Granted	629,047		$	2.56
Exercised	—
Exercised	—
Forfeited / lapsed	—
Forfeited / lapsed	—
Balance at November 28, 2004	3,418,162			$	2.56
Balance at May 30, 2004	3,418,162		$	2.56
Vested at November 28, 2004	2,589,627			$	2.56
Vested at May 30, 2004	351,762		$	2.56

Deferred Compensation Plans. UAP Holding Corp. maintains two deferred compensation plans for the benefit of certain members of our management, the 2003 Deferred Compensation Plan (the “2003 DCP”), which was adopted in connection with the Acquisition and the 2004 Deferred Compensation Plan (the “2004 DCP”), which was adopted on April 2, 2004. The 2003 DCP provides for the crediting of deferred shares for each executive who entered into a retention agreement at the time of the Acquisition. The 2004 DCP provides for the crediting of deferred shares for each member of management who waived the right to receive a portion of their cash bonus for the 2004 fiscal year. Each deferred share represents the right to receive one share of common stock on the applicable payment date, subject to adjustment in the event of a stock split or similar event affecting UAP Holding Corp.’s common stock. Deferred shares become payable upon a termination of the executive’s employment, certain changes in control of UAP Holding Corp. and certain offerings of UAP Holding Corp.’s common stock (based upon certain piggyback rights contained in the Management Incentive Agreement). The plans prohibit the assignment of the deferred shares except upon an executive’s death. UAP Holding Corp. established a trust (the “Rabbi Trust”) to hold the assets of the 2003 DCP and the 2004 DCP. The assets of the Rabbi Trust are subject to the claims of UAP Holding Corp.’s creditors in the event of UAP Holding Corp.’s insolvency. As of May 29, 2005, there were 1,883,466 shares of UAP Holding Corp. common stock remaining in the Rabbi Trust.

Dividends Declared. On April 29, 2005, UAP Holding Corp.’s board of directors declared a quarterly dividend on its common stock in the amount of $0.125 per share of common stock. The record date for the dividend payment was May 13, 2005, and the payment date was June 1, 2005. Also on April 29, 2005, our board declared a dividend

on our common stock of $6.3 million to provide UAP Holding Corp. with the funds necessary to pay the dividend on June 1, 2005.

Long-Term Incentive Plan. On April 8, 2005, 246,975 UAP Holding Corp. restricted stock units were granted to certain employees and management pursuant to UAP Holding Corp.’s 2004 Long-Term Incentive Plan. The restricted stock units vest ratably over four years, 25% on each of the four anniversaries of the grant date. We recorded $0.2 million as compensation expense for the period ended May 29, 2005. On April 29, 2005, our board granted 2,500 restricted stock units to one of our directors. These restricted stock units vested immediately and were converted to common stock of UAP Holding Corp.

On April 29, 2005, UAP Holding Corp.’s board of directors adopted a directors deferred compensation plan (the “Director DCP”). The Director DCP allows non-employee directors to elect to defer payment of all or a portion of their fees and have such amounts credited under the plan in the form of deferred shares. UAP Holding Corp.’s board of directors (or its compensation committee) may also grant its non-employee directors deferred shares under the Director DCP. Each deferred share represents the right to receive one share of common stock on the applicable payment date, subject to adjustment in the event of a stock split or similar event affecting UAP Holding Corp.’s common stock. Deferred shares become payable immediately upon a termination of the director’s service. Shares delivered under the Director DCP in respect of an award of deferred shares are charged against the share limits of the 2004 Plan. The Director DCP prohibits the assignment of the deferred shares except upon a director’s death. There were no restricted stock units outstanding under the director plan as of May 29, 2005.

11. Business Segment and Related Information

We operate in one segment. Net sales by geographical area are based on the location of the facility producing the sales. Net sales and long-lived assets by geographical area are as follows:

	Thirteen WeeksEndedMay 29, 2005		Fourteen Weeks Ended May 30, 2004
	(dollars in thousands)
Net sales
United States	$	1,322,500	$	1,226,589
Canada		34,410		31,900
Total	$	1,356,910	$	1,258,489

	May 29,2005		February 27,2005		May 30,2004
	(dollars in thousands)
Long-lived assets
United States	$	167,884	$	169,353	$	171,325
Canada		3,826		4,098		3,873
Total	$	171,710	$	173,451	$	175,198

Net sales by product category are as follows:

	Thirteen Weeks Ended May 29, 2005		Fourteen WeeksEndedMay 30, 2004
	(dollars in thousands)
Net sales by product category
Chemicals	$	723,540	$	724,095
Fertilizer		336,427		280,733
Seed		276,298		233,611
Other		20,645		20,050
Total	$	1,356,910	$	1,258,489

Long-lived assets consist of property, plant and equipment net of depreciation, goodwill, intangible assets net of amortization, deferred income taxes, debt issuance costs net of amortization, investment in unconsolidated affiliates, and other assets. Long-lived assets by geographical area are based on the location of our facilities.

12Deferred Compensation Plans. ~~Guarantor/Non-Guarantor~~UAP ~~Financial~~Holding ~~Information~~Corp. maintains two deferred compensation plans for the benefit of certain members of our management, the 2003 Deferred Compensation Plan (the “2003 DCP”), which was adopted in connection with the Acquisition and the 2004 Deferred Compensation Plan (the “2004 DCP”), which was adopted on April 2, 2004. The 2003 DCP provides for the crediting of deferred shares for each executive who entered into a retention agreement at the time of the Acquisition. The 2004 DCP provides for the crediting of deferred shares for each member of management who waived the right to receive a portion of their cash bonus for the 2004 fiscal year. Each deferred share represents the right to receive one share of common stock on the applicable payment date, subject to adjustment in the event of a stock split or similar event affecting UAP Holding Corp.’s common stock. Deferred shares become payable upon a termination of the executive’s employment, certain changes in control of UAP Holding Corp. and certain offerings of UAP Holding Corp.’s common stock (based upon certain piggyback rights contained in the Management Incentive Agreement). The plans prohibit the assignment of the deferred shares except upon an executive’s death. UAP Holding Corp. established a trust (the “Rabbi Trust”) to hold the assets of the 2003 DCP and the 2004 DCP. The assets of the Rabbi Trust are subject to the claims of UAP Holding Corp.’s creditors in the event of UAP Holding Corp.’s insolvency. As of November 27, 2005, there were 1,765,924 shares of UAP Holding Corp. common stock remaining in the Rabbi Trust.

~~The~~Dividends ~~8¼%~~Declared ~~Senior~~and ~~Notes~~Paid. ~~issued~~On byOctober 6, ~~the~~2005, ~~Company~~UAP ~~are~~Holding ~~fully~~Corp.’s ~~and~~board ~~unconditionally~~of ~~guaranteed~~directors ondeclared a ~~joint~~quarterly ~~and~~dividend ~~several~~on ~~basis~~its ~~pursuant~~common tostock ~~guarantees~~in bythe amount ~~all~~of $0.1625 per share of ~~the~~common ~~Company’s domestic~~stock. ~~subsidiaries~~The (record date for the ~~“Guarantors”)~~dividend payment was November 15, ~~except~~2005, asand ~~noted~~the ~~below~~payment date was December 1, 2005. ~~Each~~Also on October 6, 2005, our board declared a dividend on our common stock of ~~the~~$8.2 million ~~Company’s~~to ~~direct~~provide ~~and~~UAP ~~indirect~~Holding ~~subsidiaries~~Corp. iswith ~~100%~~the ~~owned~~funds bynecessary to pay the ~~Company~~dividend on December 1, 2005. ~~The~~We ~~8¼%~~also ~~Senior~~paid ~~Notes~~a ~~are~~dividend ~~not~~of ~~guaranteed~~$6.3 bymillion on June 1, 2005 to provide UAP Holding Corp., ~~and~~with the ~~Canadian~~funds necessary to pay the previously ~~distribution~~declared ~~businesses.~~dividend ~~Condensed~~on ~~consolidating~~its ~~financial~~common ~~information~~stock ~~for~~in the ~~Guarantors~~amount of $0.125 per share of common stock, and ~~the~~we ~~Non-Guarantors~~paid a dividend of $8.2 million on September 1, ~~excluding~~2005 to provide UAP Holding Corp., iswith asthe ~~follows:~~funds necessary to pay the previously declared dividend on its common stock in the amount of $0.1625 per share of common stock.

Long-Term Incentive Plan. During the thirteen weeks ended November 27, 2005, no restricted stock units (“RSU’s”) were granted to eligible employees and management pursuant to the UAP Holding Corp. 2004 Long-Term Incentive Plan. A total of 249,575 RSU’s have been granted and 18,925 RSU’s have been forfeited in the thirty-nine weeks ended November 27, 2005. There were 230,650 RSU’s outstanding at November 27, 2005. The RSU’s vest ratably over four years, 25% on each of the four anniversaries of the grant date. We recorded $0.2 million and $0.6 million as compensation expense for the thirteen and thirty-nine week periods ended November 27, 2005.

On April 29, 2005, UAP Holding Corp.’s board of directors adopted a directors deferred compensation plan (the “Director DCP”). The Director DCP allows non-employee directors to elect to defer payment of all or a portion of their fees and have such amounts credited under the plan in the form of deferred shares. UAP Holding Corp.’s board of directors (or its compensation committee) may also grant its non-employee directors deferred shares under the Director DCP. Each deferred share represents the right to receive one share of common stock on the applicable payment date, subject to adjustment in the event of a stock split or similar event affecting UAP Holding Corp.’s common stock. Deferred shares become payable immediately upon termination of the director’s service. Shares delivered under the Director DCP in respect of an award of deferred shares are charged against the share limits of the 2004 Long-Term Incentive Plan. The Director DCP prohibits the assignment of the deferred shares except upon a director’s death. There were no restricted stock units outstanding under the Director DCP as of November 27, 2005.

~~UNITED~~11. ~~AGRI~~Business ~~PRODUCTS,~~Segment ~~INC.~~and Related Information

~~CONDENSED~~We ~~CONSOLIDATING~~operate ~~BALANCE~~in ~~SHEETS~~one segment. Net sales and long-lived assets by geographical area are as follows:

May 29, 2005


Net sales	Thirteen Weeks Ended				Thirty-Nine Weeks Ended November 27, 2005		Forty Weeks Ended November 28, 2004
Net sales	November 27, 2005		November 28, 2004		Thirty-Nine Weeks Ended November 27, 2005		Forty Weeks Ended November 28, 2004
	(dollars in thousands)
United States	$	311,536	$	261,036	$	2,361,386	$	2,164,069
Canada		11,553		6,121		76,072		65,558

Total	$	323,089	$	267,157	$	2,437,458	$	2,229,627

~~(dollars~~Net insales ~~thousands)~~by geographical area are based on the location of the facility producing the sales.

UNAUDITED


Long-lived assets	November 27, 2005		February 27, 2005		November 28, 2004
	(dollars in thousands)
United States	$	164,640	$	169,353	$	165,532
Canada		4,033		4,098		4,492

Total	$	168,673	$	173,451	$	170,024

	United AgriProducts,Inc.		Guarantors			CanadianDistributionBusinessNon-Guarantors			Other Non-Guarantor /Eliminations /Adjustments			Total
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	13,848		$	1,882		$	—		$	15,730
Receivables, net		—		976,308			32,553			—			1,008,861
Inventories		—		654,909			27,004			—			681,913
Deferred income taxes		—		20,861			362			—			21,223
Vendor prepay		—		33,360			—			—			33,360
Other current assets		—		4,200			816			—			5,016
Total current assets		—		1,703,486			62,617			—			1,766,103
Property, plant and equipment		—		103,320			4,094			—			107,414
Less accumulated depreciation		—		(17,376	)		(500	)		—			(17,876	)
Property, plant and equipment, net		—		85,944			3,594			—			89,538
Goodwill		—		34,645			—			—			34,645
Intangible assets, net		—		25,561			—			—			25,561
Deferred income taxes		—		964			232			—			1,196
Debt issue costs, net		16,767		—			—			—			16,767
Investment in unconsolidated affiliates		—		3,360			—			—			3,360
Investment in affiliates		425,151		—			—			(425,151	)		—
Other assets		—		643			—			—			643
Total assets	$	441,918	$	1,854,603		$	66,443		$	(425,151	)	$	1,937,813
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Intercompany borrowings	$	14,082	$	14,454		$	2,503		$	—		$	31,039
Accounts payable		—		1,193,687			23,999			—			1,217,686
Other accrued liabilities		6,305		195,828			3,136			—			205,269
Income taxes payable		—		30,418			4,961			—			35,379
Deferred income taxes		—		108			—			—			108
Total current liabilities		20,387		1,434,495			34,599			—			1,489,481
Long-term debt		203,500		—			—			—			203,500
Other non-current liabilities		—		3,645			—			—			3,645
Deferred income taxes		—		23,156			—			—			23,156
Commitments and contingencies (note 8)
Stockholder’s equity:
Common stock, $1.00 par value, 100,000 shares authorized, 1,000 issued and outstanding		1		—			—			—			1
Additional paid-in capital		175,842		289,574			22,834			(312,408	)		175,842
Retained (deficit) earnings		39,310		103,733			6,125			(109,858	)		39,310
Accumulated other comprehensive income (loss)		2,878		—			2,885			(2,885	)		2,878
Stockholder’s equity		218,031		393,307			31,844			(425,151	)		218,031
Total liabilities and stockholder’s equity	$	441,918	$	1,854,603		$	66,443		$	(425,151	)	$	1,937,813

Net sales by product category are as follows:


Net sales by product category	Thirteen Weeks Ended				Thirty-Nine Weeks Ended November 27, 2005		Forty Weeks Ended November 28, 2004
Net sales by product category	November 27, 2005		November 28, 2004		Thirty-Nine Weeks Ended November 27, 2005		Forty Weeks Ended November 28, 2004
	(dollars in thousands)
Chemicals	$	180,229	$	158,869	$	1,474,224	$	1,416,590
Fertilizer		112,867		85,149		596,138		494,418
Seed		14,940		14,482		313,909		274,453
Other		15,053		8,657		53,187		44,166

Total	$	323,089	$	267,157	$	2,437,458	$	2,229,627

12.

Guarantor/Non-Guarantor Financial Information

The 8¹/4% Senior Notes issued by us are fully and unconditionally guaranteed on a joint and several basis pursuant to guarantees by all of our domestic subsidiaries (the “Guarantors”), except as noted below. Each of our direct and indirect subsidiaries is 100% owned by us. The 8¹/4% Senior Notes are not guaranteed by either UAP Holding Corp., or the Canadian distribution business. Condensed consolidating financial information for the Guarantors and the Non-Guarantors, excluding UAP Holding Corp., is as follows:

UNITED AGRI PRODUCTS, INC.

CONDENSED CONSOLIDATING BALANCE ~~SHEETS~~SHEET

~~February~~ November 27, 2005

(dollars in thousands)

UNAUDITED

	United AgriProducts,Inc.			Guarantors	~~Guarantors~~			CanadianDistributionBusinessNon-Guarantors	~~CanadianDistributionBusinessNon-Guarantors~~			Eliminations /Adjustments	~~Other Non-Guarantor /Eliminations /Adjustments~~			Total	~~Total~~
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	$10,104	~~37,430~~		$	$3,818	~~10,771~~		$	$—	—		$	$13,922	~~48,201~~
Receivables, net		—			599,451	~~228,158~~			17,219	~~7,017~~			—	—			616,670	~~235,175~~
Inventories		—			522,884	~~668,973~~			13,757	~~28,161~~			—	—			536,641	~~697,134~~
Deferred income taxes		—			24,242	~~16,896~~			389	~~367~~			—	—			24,631	~~17,263~~
Vendor prepay		—			20,511	~~149,010~~			1,545	—			—	—			22,056	~~149,010~~
Other current assets		~~3,282~~—			4,212	~~2,059~~			171	~~1,969~~			—	—			4,383	~~7,310~~
Total current assets		~~3,282~~—			1,181,404	~~1,102,526~~			36,899	~~48,285~~			—	—			1,218,303	~~1,154,093~~
Property, plant and equipment		—			109,843	~~100,434~~			4,460	~~4,311~~			—	—			114,303	~~104,745~~
Less accumulated depreciation		—			(22,669	~~(14,632~~)	)		(676	~~(448~~)	)		—	—			(23,345	~~(15,080~~)	)
Property, plant and equipment, net		—			87,174	~~85,802~~			3,784	~~3,863~~			—	—			90,958	~~89,665~~
Goodwill		—			32,431	~~34,645~~			—	—			—	—			32,431	~~34,645~~
Intangible assets, net		—			24,897	~~25,894~~			—	—			—	—			24,897	~~25,894~~
Deferred income taxes		—			1,195	~~1,328~~			249	~~235~~			—	—			1,444	~~1,563~~
Debt issue costs, net		1714,~~107~~811			—	—			—	—			—	—			14,811	~~17,107~~
Investment in unconsolidated affiliates		—			3,666	~~4,071~~			—	—			—	—			3,666	~~4,071~~
Investment in affiliates		~~373~~446,~~549~~651			—	—			—	—			(446,651	~~(373,549~~)	)		—	—
Other assets		—			466	~~506~~			—	—			—	—			466	~~506~~
Total assets	$	~~393~~461,~~938~~462		$	$1,331,233	~~1,254,772~~		$	$40,932	~~52,383~~		$	$(446,651	~~(373,549~~)	)	$	$1,386,976	~~1,327,544~~
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Short-term debt	$	—		$	$148,965	55		$	$—	—		$	$—	—		$	$148,965	55
Intercompany borrowings		1727,~~107~~791			9,125	~~1,585~~			(1,496	~~6,595~~)			—	—			35,420	~~25,287~~
Accounts payable		—			624,662	~~812,148~~			5,523	~~10,716~~			—	—			630,185	~~822,864~~
Other accrued liabilities		—8,202			95,661	~~70,652~~			4,208	~~2,034~~			—	—			108,071	~~72,686~~
Income taxes payable		—			12,528	—			2,121	~~3,252~~			—	—			14,649	~~3,252~~
Deferred income taxes		—			1,580	~~108~~			—	—			—	—			1,580	~~108~~
Total current liabilities		1735,~~107~~993			892,521	~~884,548~~			10,356	~~22,597~~			—	—			938,870	~~924,252~~
Long-term debt		203,500			—	—			—	—			—	—			203,500	~~203,500~~
Other non-current liabilities		—			2,753	~~2,871~~			—	—			—	—			2,753	~~2,871~~
Deferred income taxes		—			19,884	~~23,590~~			—	—			—	—			19,884	~~23,590~~
Commitments and contingencies (note 8)
Stockholder’s equity:
Common stock, $1.00 par value, 100,000 shares authorized, 1,000 issued and outstanding		1			—	—			—	—			—	—			1	1
Additional paid-in capital		175,842			295,981	~~289,574~~			16,427	~~22,834~~			(312,408	~~(312,408~~)	)		175,842	~~175,842~~
Retained (deficit) earnings		(540,~~802~~898	)		120,094	~~54,189~~			8,921	~~3,654~~			(129,015	~~(57,843~~)	)		40,898	~~(5,802~~	)
Accumulated other comprehensive income (loss)		35,~~290~~228			—	—			5,228	~~3,298~~			(5,228	~~(3,298~~)	)		5,228	~~3,290~~
Stockholder’s equity		~~173~~221,~~331~~969			416,075	~~343,763~~			30,576	~~29,786~~			(446,651	~~(373,549~~)	)		221,969	~~173,331~~
Total liabilities and stockholder’s equity	$	~~393~~461,~~938~~462		$	$1,331,233	~~1,254,772~~		$	$40,932	~~52,383~~		$	$(446,651	~~(373,549~~)	)	$	$1,386,976	~~1,327,544~~

UNITED AGRI PRODUCTS, INC.

CONDENSED CONSOLIDATING BALANCE ~~SHEETS~~SHEET

~~May 30~~February 27, ~~2004~~2005

(dollars in thousands)

UNAUDITED

	United AgriProducts,Inc.			Guarantors			CanadianDistributionBusinessNon-Guarantors			Other Non-Guarantor /Eliminations /Adjustments			Total
	United Agri Products, Inc.			Guarantors			Canadian Distribution Business Non-Guarantors			Eliminations / Adjustments			Total
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	2137,~~732~~430		$	410,~~861~~771		$	—		$	2648,~~593~~201
Receivables, net		—			~~865~~228,~~837~~158			307,~~220~~017			—			~~896~~235,~~057~~175
Inventories		—			~~569~~668,~~988~~973			2428,~~091~~161			—			~~594~~697,~~079~~134
Deferred income taxes		~~2,670~~—			~~433~~16,896			—367			—			317,~~103~~263
Vendor prepay		—			32149,~~243~~010			—			—			32149,~~243~~010
Other current assets		—3,282			92,~~100~~059			1,~~389~~969			—			107,~~489~~310
Total current assets		23,~~670~~282			1,~~499~~102,~~333~~526			6048,~~561~~285			—			1,~~562~~154,~~564~~093
Property, plant and equipment		—			98100,~~531~~434			4,~~076~~311			—			~~102~~104,~~607~~745
Less accumulated depreciation		—			(514,~~236~~632	)		(~~206~~448	)		—			(515,~~442~~080	)
Property, plant and equipment, net		—			9385,~~295~~802			3,~~870~~863			—			9789,~~165~~665
Goodwill		—			4334,~~465~~645			—			—			4334,~~465~~645
Intangible assets, net		—			625,~~705~~894			—			—			625,~~705~~894
Deferred income taxes		—			61,~~605~~328			—235			—			61,~~605~~563
Debt issue costs, net		917,~~658~~107			~~9,589~~—			—			—			1917,~~247~~107
Investment in unconsolidated affiliates		—			34,~~050~~071			—			—			34,~~050~~071
Investment in affiliates		~~448~~373,~~078~~549			—			—			(~~448~~373,~~078~~549	)		—
Other assets		—			~~(1,042~~506	)		3—			—			~~(1,039~~506	)
Total assets	$	~~460~~393,~~406~~938		$	1,~~661~~254,~~000~~772		$	6452,~~434~~383		$	(~~448~~373,~~078~~549	)	$	1,~~737~~327,~~762~~544
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Short-term debt	$	—		$	~~39,172~~55		$	~~2,951~~—		$	—		$	~~42,123~~55
Intercompany borrowings		—17,107			~~(133~~1,585	)		—6,595			—			~~(133~~25,287	)
Accounts payable		—			~~972~~812,~~319~~148			2310,~~824~~716			—			~~996~~822,~~143~~864
Other accrued liabilities		~~17,309~~—			~~212~~70,~~511~~652			52,~~576~~034			—			~~235~~72,~~396~~686
Income taxes payable		—			~~6,517~~—			—3,252			—			63,~~517~~252
Deferred income taxes		—			~~8,709~~108			—			—			~~8,709~~108
Total current liabilities		17,~~309~~107			1884,~~239,095~~548			3222,~~351~~597			—			1924,~~288,755~~252
Long-term debt		~~225~~203,~~000~~500			—			—			—			~~225~~203,~~000~~500
Other non-current liabilities		—			52,~~646~~871			—			—			52,~~646~~871
Deferred income taxes		—			~~264~~23,590			—			—			~~264~~23,590
Commitments and contingencies (note 8)
Stockholder’s equity:
Common stock, $1.00 par value, 100,000 shares authorized, 1,000 issued and outstanding		1			—			—			—			1
Additional paid-in capital		~~179~~175,~~999~~842			~~372~~289,~~839~~574			3322,~~316~~834			(~~406~~312,~~155~~408	)		~~179~~175,~~999~~842
Retained (deficit) earnings		38(5,~~699~~802	)		4354,~~156~~189			(13,~~231~~654	)		(4157,~~925~~843	)		38(5,~~699~~802	)
Accumulated other comprehensive income (loss)		~~(602~~3,290	)		—			(23,298	)		2(3,298	)		~~(602~~3,290	)
Stockholder’s equity		~~218~~173,~~097~~331			~~415~~343,~~995~~763			3229,~~083~~786			(~~448~~373,~~078~~549	)		~~218~~173,~~097~~331
Total liabilities and stockholder’s equity	$	~~460~~393,~~406~~938		$	1,~~661~~254,~~000~~772		$	6452,~~434~~383		$	(~~448~~373,~~078~~549	)	$	1,~~737~~327,~~762~~544

UNITED AGRI PRODUCTS, INC.

CONDENSED CONSOLIDATING ~~STATEMENT~~BALANCE OFSHEET ~~EARNINGS~~

~~Thirteen Weeks Ended May 29~~November 28, ~~2005~~ 2004

(dollars in thousands)

UNAUDITED

	United AgriProducts,Inc.			Guarantors			CanadianDistributionBusinessNon-Guarantors			Other Non-Guarantor /Eliminations /Adjustments				Total
	United Agri Products, Inc.			Guarantors			Canadian Distribution Business Non-Guarantors				Eliminations / Adjustments				Total
Net sales	$	—		$	1,322,500		$	34,410		$	—			$	1,356,910
ASSETS
Costs and expenses:
Current assets:
Cost of goods sold		—			1,160,803			27,355			—				1,188,158
Cash and cash equivalents	$	—		$	6,694		$	2,356			$	(2,356	)		$	6,694
Gross profit		—			161,697			7,055			—				168,752
Receivables, net		—			517,669			13,502				—				531,171
Selling, general and administrative expenses		309			83,108			2,206			—				85,623
Inventories		—			470,659			19,990				—				490,649
(Gain) on sale of assets		—			(18	)		—			—				(18	)
Deferred income taxes		—			27,228			—				—				27,228
Royalties, service charges and other income and expenses		—			(7,999	)		215			—				(7,784	)
Vendor prepay		—			32,957			—				—				32,957
Operating income		(309	)		86,606			4,634			—				90,931
Other current assets		—			10,238			477				—				10,715
Third party interest expense		682			4,674			369			—				5,725
Total current assets		—			1,065,445			36,325				(2,356	)			1,099,414
Income before income taxes		(991	)		81,932			4,265			—				85,206
Property, plant and equipment		—			95,788			4,893				—				100,681
Income tax expense		(393	)		32,388			1,794			—				33,789
Less accumulated depreciation		—			(11,808	)		(401	)			—				(12,209	)
Net income		(598	)		49,544			2,471			—				51,417
Property, plant and equipment, net		—			83,980			4,492				—				88,472
Equity in earnings of consolidated affiliates		52,015			—			—			(52,015	)			—
Goodwill		—			27,873			—				—				27,873
Net Income	$	51,417		$	49,544		$	2,471		$	(52,015	)		$	51,417
Intangible assets, net		—			29,527			—				—				29,527
Deferred income taxes		—			—			—				—				—
Debt issue costs, net		8,996			10,202			—				—				19,198
Investment in unconsolidated affiliates		—			4,301			—				—				4,301
Investment in affiliates		428,166			—			—				(428,166	)			—
Other assets		—			653			—				—				653
Total assets	$	437,162		$	1,221,981		$	40,817			$	(430,522	)		$	1,269,438
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Short-term debt	$	—		$	211,556		$	—			$	—			$	211,556
Intercompany borrowings		42,635			(42,794	)		3,969				—				3,810
Accounts payable		—			524,208			5,394				—				529,602
Other accrued liabilities		8,849			104,979			2,882				(2,356	)			114,354
Income taxes payable		—			—			4,146				—				4,146
Deferred income taxes		—			46			—				—				46
Total current liabilities		51,484			797,995			16,391				(2,356	)			863,514
Long-term debt		225,000			—			—				—				225,000
Other non-current liabilities		—			2,644			—				—				2,644
Deferred income taxes		—			17,602			—				—				17,602
Commitments and contingencies (note 8)
Stockholder’s equity:
Common stock, $1.00 par value, 100,000 shares authorized, 1,000 issued and outstanding		1			—			—								1
Additional paid-in capital		175,842			358,494			16,773				(375,267	)			175,842
Retained (deficit) earnings		(19,836	)		45,246			2,982				(48,228	)			(19,836	)
Accumulated other comprehensive income (loss)		4,671			—			4,671				(4,671	)			4,671
Stockholder’s equity		160,678			403,740			24,426				(428,166	)			160,678
Total liabilities and stockholder’s equity	$	437,162		$	1,221,981		$	40,817			$	(430,522	)		$	1,269,438

UNITED AGRI PRODUCTS, INC.

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS

~~Fourteen~~Thirty-Nine Weeks Ended ~~May 30~~November 27, ~~2004~~ 2005

(dollars in thousands)

UNAUDITED

	United AgriProducts,Inc.			Guarantors			CanadianDistributionBusinessNon-Guarantors			~~Other Non-Guarantor /Eliminations /Adjustments~~	Eliminations /Adjustments			~~Total~~	Total
Net sales	$	—		$	~~1,226,589~~		$	~~31,900~~		$	—			$	~~1,258,489~~
Costs and expenses:	$	—		$	2,361,386		$	76,072			$	—			$	2,437,458
Cost of goods sold		—			12,~~098~~047,~~245~~794			2460,~~510~~097			—	—			~~1,122,755~~	2,107,891
Gross profit		—			~~128~~313,~~344~~592			715,~~390~~975			—	—			~~135,734~~	329,567
Selling, general and administrative expenses		—901			80207,~~723~~045			26,~~088~~196			—	—			~~82,811~~	214,142
(Gain) on sale of assets		—			(572	)		—			—				(572	)
(Gain) loss on sale of assets		—			(1,580	)		48				—				(1,532	)
Royalties, service charges and other income and expenses		—			(2,953	)		280			—				(2,673	)
Restructuring costs		—			1,460			—				—				1,460
Operating income		—			51,146			5,022			—				56,168
Royalties, service charges and other (income) and expenses		—			(20,318	)		(421	)			—				(20,739	)
Third party interest expense		5,152			3,195			81			—				8,428
Operating income (loss)		(901	)		126,985			10,152				—				136,236
Finance related and other charges		1,875			—			—			—				1,875
Third party interest expense		2,045			17,289			1,059				—				20,393
Income before income taxes		(7,027	)		47,951			4,941			—				45,865
Income (loss) before income taxes		(2,946	)		109,696			9,093				—				115,843
Income tax expense		(2,670	)		18,256			2,371			—				17,957
Income tax expense (benefit)		(1,183	)		43,792			3,826				—				46,435
Net income		(4,357	)		29,695			2,570			—				27,908
Net income (loss)		(1,763	)		65,904			5,267				—				69,408
Equity in earnings of consolidated affiliates		3271,~~265~~171			—			—			~~(32,265~~	)(71,171	)		—	—
Net Income	$	2769,~~908~~408		$	2965,~~695~~904		$	25,~~570~~267		$	~~(32,265~~$	)(71,171	)	$	~~27,908~~$	69,408

UNITED AGRI PRODUCTS, INC.

CONDENSED CONSOLIDATING STATEMENT OF ~~CASH~~EARNINGS ~~FLOWS~~

~~Thirteen~~Forty Weeks Ended ~~May 29~~November 28, ~~2005~~ 2004

(dollars in thousands)

UNAUDITED

	United AgriProducts, Inc.			Guarantors			CanadianDistributionBusinessNon-Guarantors			Other Non-Guarantor /Eliminations /Adjustments			Total
	United AgriProducts,Inc.			Guarantors			CanadianDistributionBusinessNon-Guarantors			Eliminations /Adjustments				Total
Operations
Net sales	$	—		$	2,164,069		$	65,558		$	—			$	2,229,627
Net income (loss)	$	(598	)	$	49,544		$	2,471		$	—		$	51,417
Costs and expenses:
Adjustments to reconcile net income to net cash provided by operating activities:
Cost of goods sold		—			1,918,657			50,892			—				1,969,549
Depreciation		—			2,781			64			—			2,845
Gross profit		—			245,412			14,666			—				260,078
Amortization of intangibles		—			332			—			—			332
Selling, general and administrative expenses		956			193,341			6,688			—				200,985
Amortization of debt issuance costs		991			—			—			—			991
(Gain) on sale of assets		—			(607	)		(16	)		—				(623	)
Gain on sales of fixed assets		—			(78	)		60			—			(18	)
Restructuring costs		—			857			—			—				857
Stock compensation		—			173			—			—			173
Royalties, service charges and other (income) and expenses		—			(18,914	)		67			—				(18,847	)
Deferred tax provision (benefit)		—			(4,025	)		—			—			(4,025	)
Operating income (loss)		(956	)		70,735			7,927			—				77,706
Change in operating assets and liabilities:		3,282			(106,487	)		(7,401	)		—			(110,606	)
Third party interest expense		15,102			8,950			891			—				24,943
Net cash provided by (used in) operations		3,675			(57,760	)		(4,806	)		—			(58,891	)
Finance related and other charges		—			11,653			—			—				11,653
Investing
Income (loss) before income taxes		(16,058	)		50,132			7,036			—				41,110
Additions to property, plant and equipment		—			(3,155	)		(60	)		—			(3,215	)
Income tax expense (benefit)		(6,263	)		18,348			3,809			—				15,894
Proceeds from sales of assets		—			187			194			—			381
Net income (loss)		(9,795	)		31,784			3,227			—				25,216
Investment in unconsolidated affiliates		—			711			—			—			711
Equity in earnings of consolidated affiliates		35,011			—			—			(35,011	)			—
Net cash provided by (used in) investing activities		—			(2,257	)		134			—			(2,123	)
Net income (loss)	$	25,216		$	31,784		$	3,227		$	(35,011	)		$	25,216
Financing
Checks written in excess of bank balances		—			23,621			—			—			23,621
Net borrowings of short-term debt		—			(55	)		—			—			(55	)
Debt issuance costs		(650	)		—			—			—			(650	)
Due to (from) affiliates		(3,025	)		12,869			(4,092	)		—			5,752
Net cash provided by (used in) financing activities		(3,675	)		36,435			(4,092	)		—			28,668
Net change in cash and cash equivalents		—			(23,582	)		(8,764	)		—			(32,346	)
Net effect of exchange rates on cash and cash equivalents		—			—			(125	)		—			(125	)
Net change in cash and cash equivalents		—			(23,582	)		(8,889	)		—			(32,471	)
Cash and cash equivalents at beginning of period		—			37,430			10,771			—			48,201
Cash and cash equivalents at end of period	$	—		$	13,848		$	1,882		$	—		$	15,730

UNITED AGRI PRODUCTS, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

~~Fourteen~~Thirty-Nine Weeks Ended ~~May 30~~November 27, ~~2004~~ 2005

(dollars in thousands)

UNAUDITED

	United AgriProducts, Inc.			Guarantors			CanadianDistributionBusinessNon-Guarantors			Other Non-Guarantor /Eliminations /Adjustments			Total
	United AgriProducts,Inc.			Guarantors			CanadianDistributionBusinessNon-Guarantors			Eliminations /Adjustments				Total
Operations
Net income (loss)	$	(469,~~357~~408	)	$	2965,~~695~~904		$	25,~~570~~267		$	—(71,171	)	$	~~27,908~~$	69,408
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		—			3,402			99			—			3,501
Equity earnings of consolidated subsidiaries		(71,171	)		—			—			71,171				—
Amortization of intangibles		—			365			—			—			365
Depreciation		—			8,332			187			—				8,519
Amortization of debt issuance costs		827			—			—			—			827
Amortization of intangibles		—			997			—			—				997
Gain on sales of fixed assets		—			(573	)		1			—			(572	)
Amortization of debt issuance costs		2,945			—			—			—				2,945
Deferred tax provision (benefit)		(2,308	)		13,347			—			—			11,039
Gain on sales of fixed assets		—			(1,580	)		48			—				(1,532	)
Change in operating assets and liabilities:		5,838			(241,156	)		(12,506	)		—			(247,824	)
Deferred tax provision (benefit)		—			(9,482	)		—			—				(9,482	)
Net cash used in operations		—			(194,920	)		(9,836	)		—			(204,756	)
Change in operating assets and liabilities:		2,527			(254,847	)		1,269			761				(250,290	)
Investing
Net cash provided by (used in) operations		3,709			(190,676	)		6,771			761				(179,435	)
Additions to property, plant and equipment		—			(3,862	)		(28	)		—			(3,890	)
Investing
Proceeds from sales of assets		—			845			12			—			857
Additions to property, plant and equipment		—			(10,085	)		(141	)		—				(10,226	)
Investment in unconsolidated affiliates		—			908			—			—			908
Proceeds from sales of assets		—			2,030			154			—				2,184
Net cash used in investing activities		—			(2,109	)		(16	)		—			(2,125	)
Other		—			405			—			—				405
Financing
Net cash provided by (used in) investing activities		—			(7,650	)		13			—				(7,637	)
Checks written in excess of bank balances		—			19,437			—			—			19,437
Financing
Net borrowings of short-term debt		—			39,253			2,951			—			42,204
Check float on zero balance accounts		—			8,143			—			—				8,143
Due to (from) affiliates		—			(6,233	)		6,100			—			(133	)
Net repayments of short-term debt		—			148,910			—			—				148,910
Net cash provided by financing		—			52,457			9,051			—			61,508
Debt issuance costs		(650	)					—			—				(650	)
Net change in cash and equivalents		—			(144,572	)		(801	)		—			(145,373	)
Due to (from) affiliates		10,685			7,540			(8,091	)		—				10,134
Net effect of exchange rates on cash and equivalents		—			—			(19	)		—			(19	)
Capital contribution		—			6,407			(6,407	)		—				—
Net change in cash and cash equivalents		—			(144,572	)		(820	)		—			(145,392	)
Common stock dividend paid		(14,505	)		—			—			—				(14,505	)
Cash and cash equivalents at beginning of period		—			166,304			5,681			—			171,985
Net cash provided by (used in) financing activities		(4,470	)		171,000			(14,498	)		—				152,032
Cash and cash equivalents at end of period	$	—		$	21,732		$	4,861		$	—		$	26,593
Net change in cash and cash equivalents		(761	)		(27,326	)		(7,714	)		761				(35,040	)
Net effect of exchange rates on cash and cash equivalents		761			—			761			(761	)			761
Net change in cash and cash equivalents		—			(27,326	)		(6,953	)		—				(34,279	)
Cash and cash equivalents at beginning of period		—			37,430			10,771			—				48,201
Cash and cash equivalents at end of period	$	—		$	10,104		$	3,818		$	—			$	13,922

UNITED AGRI PRODUCTS, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Forty Weeks Ended November 28, 2004

(dollars in thousands)

UNAUDITED


	United Agri Products, Inc.			Guarantors			Canadian Distribution Business Non-Guarantors			Eliminations / Adjustments			Total
Operations
Net income (loss)	$	25,216		$	31,784		$	3,227		$	(35,011	)	$	25,216
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity earnings of consolidated subsidiaries		(35,011	)		—			—			35,011			—
Depreciation		—			9,297			244			—			9,541
Amortization of intangibles		1,440			(295	)		—			—			1,145
Amortization of debt issuance costs		—			2,532			—			—			2,532
Gain on sales of fixed assets		—			(623	)		—			—			(623	)
Deferred tax provision		—			2,194			—			—			2,194
Change in operating assets and liabilities:		63,679			(370,557	)		(11,472	)		4,676			(313,674	)

Net cash provided by (used in) operations		55,324			(325,668	)		(8,001	)		4,676			(273,669	)
Investing
Acquisition payment to ConAgra Foods Inc.		—			(58,236	)		—			—			(58,236	)
Additions to property, plant and equipment		—			(9,362	)		—			—			(9,362	)
Proceeds from sales of assets		—			3,246			—			—			3,246
Other		—			(343	)		—			—			(343	)

Net cash used in investing activities		—			(64,695	)		—			—			(64,695	)
Financing
Check float on zero balance accounts		—			19,197			—			(2,356	)		16,841
Net borrowings of short-term debt		—			211,556			—			—			211,556
Common stock dividend paid		(60,000	)		—			—			—			(60,000	)

Net cash provided by (used in) financing activities		(60,000	)		230,753			—			(2,356	)		168,397

Net change in cash and equivalents		(4,676	)		(159,610	)		(8,001	)		2,320			(169,967	)
Net effect of exchange rates on cash and equivalents		4,676			—			4,676			(4,676	)		4,676

Net change in cash and cash equivalents		—			(159,610	)		(3,325	)		(2,356	)		(165,291	)
Cash and cash equivalents at beginning of period		—			166,304			5,681			—			171,985

Cash and cash equivalents at end of period	$	—		$	6,694		$	2,356		$	(2,356	)	$	6,694

13.

Subsequent Events

On January 5, 2006, UAP Holding Corp.’s board of directors declared a quarterly dividend on its common stock in the amount of $0.1875 per share. The record date for the dividend payment will be February 15, 2006, and the payment date will be March 1, 2006. Also on January 3, 2006, our board declared a dividend on our common stock of $9.5 million to provide UAP Holding Corp. with the funds necessary to pay the dividend on March 1, 2006.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

On November 29, 2004, UAP Holding Corp. consummated the initial public offering of its common stock (the “Common Stock Offering”), which consisted of a primary offering of 3,125,000 shares of common stock by UAP Holding Corp. and a secondary offering of 28,428,125 shares of UAP Holding Corp.’s common stock by UAP Holding Corp.’s equity sponsor and certain members of its management (collectively, the “selling stockholders”).

Unless the context requires otherwise, all references to “Company,” “we, “us,” and “our”, refer specifically to United Agri Products, Inc. and its consolidated subsidiaries. Additionally, all references to “UAP Holding Corp.” refer specifically only to UAP Holding Corp., the parent of United Agri Products, Inc., excluding its subsidiaries, and all references to “United Agri Products, Inc.” refer specifically to United Agri Products, Inc., excluding its subsidiaries.

The purpose of this section is to discuss and analyze our condensed consolidated financial condition, liquidity and capital resources and results of operations for the periods presented. You should read this analysis in conjunction with ~~our~~ our condensed consolidated financial statements and notes thereto appearing elsewhere in this report. The results of operations for the thirteen and thirty-nine weeks ended ~~May 29~~November 27, 2005, are not necessarily indicative of the results to be expected for other interim periods or for the full fiscal year. This ~~discussion~~section ~~and analysis~~ should also be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended February 27, 2005.

Overview

We operate in the highly competitive agricultural inputs distribution industry. Our principal competitors in the distribution of crop production inputs include agricultural cooperatives, national fertilizer producers, major grain companies and independent distributors and brokers. We, along with other agricultural input distributors, represent the main route-to-market for agricultural input manufacturers, and fill a critical need in the U.S. and Canadian agricultural input markets by allowing suppliers to economically access a highly fragmented customer base of growers, dealers and non-crop customers.

The three primary product areas of the agricultural and non-crop input markets are chemicals, seed, and fertilizer. Our industry in general is affected by a number of factors including but not limited to, cost to distribute products, customer financial condition, local and national laws and regulations, economic conditions, employment, inflation, political climate, interest rates, fuel prices and weather patterns.

Our business depends on farm expenditures for crop inputs, which in turn is dependent upon planted acreage in the United States and Canada. Over the last ten years, the market for agricultural inputs ~~have~~has grown 3% per year, and planted acreage has been virtually flat, leading to a relatively stable but very competitive industry for crop inputs. Our opportunities within the industry will include the use of our national distribution network to further participate in the growing seed market, grow fertilizer volumes as we extend that product offering to existing customers, continue to expand our private label lines of seed and chemicals and continue to look for more efficiencies in expenses and working capital.

Background

We market a comprehensive line of products including chemicals, seed, and fertilizer to growers and regional dealers. In addition to our product offering, we provide a broad array of value-added services including crop management, biotechnology advisory services, custom blending, inventory management and custom applications of crop inputs. The products and services we offer are critical to growers because they lower the overall cost of crop production and improve crop quality and yield. As a result of our broad scale and scope, we provide leading agricultural input companies with an efficient means to access a highly fragmented customer base of farmers and growers.

We will continue to seek to grow our business, improve margins and reduce working capital through the following principal strategies:

•

Leveraging our scale;

•

Expanding our presence in seed, fertilizer, branded and non-crop products; and

•

Targeting continued margin enhancement and working capital management.

Recent Initiatives

Improving our Nationwide Network. One of our key initiatives is to grow our business by leveraging our size and leading market share across North America. We study our market share by state, county, and customer, and develop sales initiatives at a local and regional level to address any gaps and opportunities we have in our network on chemical, seed, and fertilizer. Where our data indicates an opportunity, we have the potential to add sales personnel and/or locations and assets to fill in gaps in our coverage. We have ~~also~~addressed ~~begun to address~~ the non-crop markets with a focused management team, and have made modifications to our sales coverage and asset base in ~~that~~those ~~market~~markets.

Proprietary and Private Label Business. Our proprietary and private label products offer significantly higher margins than the branded products that we sell. We currently market over 220 proprietary branded products and have a broad proprietary product offering in each of our core product areas, including non-crop. We continue to work with nearly all of our suppliers on additional private label opportunities.

Seed and Fertilizer Revenue Growth. We have experienced revenue growth in both of these product areas and believe there are significant growth opportunities going forward. As seed varieties continue to be enhanced through biotechnology we believe they will serve as a growth platform due to the increased value-added nature of their sale to the customer. We intend to leverage our growth in the seed business through: advanced technical training of our sales-force, hiring and strategically placing experienced salespeople, using incentive compensation plans, incorporating seed-specific performance goals, nurturing our relationships with our seed suppliers and targeting new retail and wholesale opportunities to enhance our sales presence in regions where gaps exist. We will also leverage our growth in the fertilizer business by nurturing relationships with fertilizer suppliers and by making modest investments in storage and blending facilities in regions where gaps exist.

Working Capital and Administrative Expense Reduction. We believe we are well positioned to continue to improve the financial performance of our business. We monitor performance regularly on key operating statistics such as credit, inventory efficiency, operating expenses, gross profit generation and overall return on invested capital. This information will continue to enable us to reduce administrative expense and average levels of working capital by concentrating on the following: earlier collection of supplier rebates, extending payable terms with key suppliers, continuing inventory efficiencies through SKU reduction efforts and centralized purchasing, evaluating our suppliers on a total return basis including working capital reductions, continuing to focus on credit policies and procedures to maximize profitability and using competition and best practices among our operating divisions to drive overall focus on working capital and expense reduction that are tied to variable compensation plans.

23Key factors affecting results of operations for the thirteen weeks ended November 27, 2005

During the third quarter of fiscal 2006, several events took place that had or may have an impact on our business.

•

We achieved or believe that it is probable that we will achieve several crop year program goals with our major chemical vendors which allowed us to increase our rebate income accrual for the third quarter by an estimated amount of approximately $19.8 million compared with the prior year. See the discussion in “Critical Accounting Policies and Estimates” on page 32 for further discussion of this item.

•

Hurricanes Katrina and Rita have impacted all industries in numerous ways. The agricultural distribution industry has seen an impact on several fronts. During our third quarter, following the hurricanes, the prices of diesel fuel and gasoline spiked to record high levels. While the prices of diesel fuel and gasoline have recently come down from their peaks, we experienced a 45% increase in our fuel expenses, or $1.4 million, on comparable gallons during the third quarter, compared to last year. For the first three quarters our total fuel expenses are higher by 31%, or $3.5 million, compared to last year. Natural gas prices have also increased dramatically due to supply issues caused by the hurricanes. Natural gas is a key ingredient in the manufacturing of nitrogen based fertilizers. These fertilizers such as anhydrous ammonia, urea and UAN solutions have seen dramatic price increases per ton. The high price of natural gas has caused several domestic fertilizer manufacturers to shut down certain production facilities until prices for their main ingredient come down. However, to date no significant supply issues have occurred.

•

On September 19, 2005, we announced a restructuring of our organization and management. As part of this restructuring, we consolidated ten of our regional distribution organizations into five. We also closed one regional finance center, further centralizing and consolidating various accounting and administrative functions. As part of this restructuring, approximately 120 employees located throughout the United States were terminated. Expenses

related to this restructuring for the quarter totaled $1.0 million. We estimate that $0.9 million remains to be expensed before this restructuring is completed in the first quarter of fiscal year 2007.

•

Also during the third quarter of fiscal 2006, we substantially completed the expansion of our fertilizer terminal in Quincy, Illinois. We expect this Mississippi River terminal to contribute to our goal of increased fertilizer sales to our existing and new customers because of its additional capacity and strategic location to the Midwestern corn-belt. This facility expansion was first identified as an opportunity through a gaps analysis of our existing fertilizer distribution network.

Please review the section “Results of Operations” below for a more detailed explanation of our financial and operational performance.

RESULTS OF OPERATIONS

~~Thirteen~~Analysis ~~Weeks~~of ~~Ended~~Condensed ~~May~~Consolidated ~~29,~~Statements ~~2005,~~of ~~Compared~~Earnings ~~to Fourteen Weeks Ended May 30, 2004~~

Analysis of Condensed Consolidated Statement of Earnings


	Thirteen Weeks Ended						Percent Change		Thirty-Nine Weeks Ended November 27, 2005			Forty Weeks Ended November 28, 2004			Percent Change
	November 27, 2005			November 28, 2004			Percent Change		Thirty-Nine Weeks Ended November 27, 2005			Forty Weeks Ended November 28, 2004			Percent Change
	(dollars in thousands)
Net Sales	$	323,089		$	267,157		20.9	%	$	2,437,458		$	2,229,627		9.3	%
Cost of goods sold		272,547			249,835		9.1	%		2,107,891			1,969,549		7.0	%

Gross profit		50,542			17,322		191.8	%		329,567			260,078		26.7	%
Selling, general and administrative expenses		55,810			47,866		16.6	%		214,142			200,985		6.5	%
(Gain) loss on sale of assets		(59	)		642		109.2	%		(1,532	)		(623	)	145.9	%
Restructuring costs		970			857		13.2	%		1,460			857		70.4	%
Royalties, service charges and other (income) and expenses		(2,915	)		(6,073	)	-52.0	%		(20,739	)		(18,847	)	10.0	%

Operating income (loss)		(3,264	)		(25,970	)	87.4	%		136,236			77,706		75.3	%
Third party interest expense		8,279			8,714		-5.0	%		20,393			24,943		-18.2	%
Finance related and other charges		—			7,903		NM			—			11,653		NM

Income (loss) before income taxes		(11,543	)		(42,587	)	72.9	%		115,843			41,110		181.8	%
Income tax expense (benefit)		(4,067	)		(16,580	)	-75.5	%		46,435			15,894		192.2	%

Net income (loss)	$	(7,476	)	$	(26,007	)	71.3	%	$	69,408		$	25,216		175.3	%

NM = Not Meaningful
Effective tax rate		35.2	%		38.9	%				40.1	%		38.7	%
Comparison as a Percent of Net Sales:
Gross margin		15.6	%		6.5	%				13.5	%		11.7	%
Selling, general and administrative expenses		17.3	%		17.9	%				8.8	%		9.0	%
Operating income (loss)		-1.0	%		-9.7	%				5.6	%		3.5	%
Income (loss) before income taxes		-3.6	%		-15.9	%				4.8	%		1.8	%
Net income (loss)		-2.3	%		-9.7	%				2.8	%		1.1	%

(dollars in thousands, except earnings per share amounts)	Thirteen WeeksEndedMay 29, 2005			Fourteen WeeksEndedMay 30, 2004			PercentChange
Net Sales	$	1,356,910		$	1,258,489		7.8	%
Cost of goods sold		1,188,158			1,122,755		5.8	%
Gross profit		168,752			135,734		24.3	%
Selling, general and administrative expenses		85,623			82,811		3.4	%
Gain on sale of assets		(18	)		(572	)	-96.9	%
Royalties, service charges and other income and expenses		(7,784	)		(2,673	)	191.2	%
Operating income		90,931			56,168		61.9	%
Third party interest expense		5,725			8,428		-32.1	%
Finance related and other charges		—			1,875		NM
Income before income taxes		85,206			45,865		85.8	%
Income tax expense		33,789			17,957		88.2	%
Net income	$	51,417		$	27,908		84.2	%
Basic and diluted earnings per share	$	51,417.39		$	27,908.00		84.2	%
NM = Not Meaningful
Effective tax rate		39.7	%		39.2	%
Comparison as a Percent of Net Sales:
Gross profit		12.4	%		10.8	%
Selling, general and administrative expenses		6.3	%		6.6	%
Operating income		6.7	%		4.5	%
Income before income taxes		6.3	%		3.6	%
Net income		3.8	%		2.2	%

Net Sales. Sales increased to $1,356.9 million in the thirteen weeks ended May 29, 2005, compared to $1,258.5 million for the fourteen weeks ended May 30, 2004. Sales of proprietary chemical and seed products were 14.5% of total chemical and seed sales in the thirteen weeks ended May 29, 2005, relatively flat compared to the fourteen weeks ended May 30, 2004.

Sales of chemicals were relatively flat at $723.5 million in the thirteen weeks ended May 29, 2005, from $724.1 million in the fourteen weeks ended May 30, 2004. Share gains in the Midwest and Northern Plains and a change in the way Monsanto bills its bulk herbicide business were offset by lower non-crop sales and slightly lower chemical tolling revenue due to the rationalization of two non-strategic formulation facilities that had provided toll manufacturing services. Higher volumes of glyphosate herbicides offset lower end user unit prices for glyphosate products. Sales of fertilizer increased to $336.4 million in the thirteen weeks ended May 29, 2005, from $280.7 million in the fourteen weeks ended May 30, 2004. The increase was due to higher pricing and higher volumes from fertilizer applications that normally occur in the fall and winter but were delayed into the spring due to wet weather. Sales of seed increased to $276.3 million in the thirteen weeks ended May 29, 2005, from $233.6 million in the fourteen weeks ended May 30, 2004. The increase was due to volume growth on both third party and proprietary brands and higher prices due to increased sales of seed with enhanced traits. Sales of other products were relatively flat at $20.6 million in the thirteen weeks ended May 29, 2005, from $20.1 million in the fourteen weeks ended May 30, 2004.

Cost of Goods Sold. Cost of goods sold was $1,188.2 million in the thirteen weeks ended May 29, 2005, compared to $1,122.8 million in the fourteen weeks ended May 30, 2004. Gross profit (net sales less cost of goods sold) was $168.8 million in the thirteen weeks ended May 29, 2005, compared to $135.7 million in the fourteen weeks ended May 30, 2004. Gross margin (gross profit as a percentage of net sales) was 12.4% in the thirteen weeks ended May 29, 2005, compared to 10.8% in the fourteen weeks ended May 30, 2004. The increase in gross profit and gross

~~margin~~Thirteen ~~was~~Weeks ~~partially~~Ended ~~due to increased cost of sales of $17.4 million in the fourteen weeks ended May 30~~November 27, ~~2004~~2005, ~~arising~~Compared ~~from purchase accounting for the Acquisition. At the Acquisition, the inventory on our books was written up $21.1 million~~ to ~~fair~~Thirteen ~~market~~Weeks ~~value.~~Ended ~~As this inventory was sold~~November 28, ~~it increased cost of sales by $17.4 million in the fourteen weeks ended May 30,~~ 2004. The remaining $15.6 million increase in gross profit was primarily due to lower supply chain costs and growth in seed and fertilizer volumes. Gross profit includes rebates, which are accrued monthly based on actual sales at the most likely estimated rates by supplier, then finalized in our fourth quarter and the accrual adjusted as necessary.

~~Selling,~~Net ~~General and Administrative Expenses~~Sales. ~~Selling,~~Sales ~~general and administrative (SG&A) expenses~~ increased to $85323.61 million in the thirteen weeks ended ~~May 29, 2005 from $82.8 million in the fourteen weeks ended May 30,~~ ~~2004. SG&A expenses were 6.3% of sales during the thirteen weeks ended May 29~~November 27, 2005, ~~and~~compared ~~6.6% of sales during the fourteen weeks ended May 30, 2004. The increase in expenses was due~~ to higher personnel costs and professional expenses associated with becoming an independent public company, and slightly higher insurance expenses, offset by one less week in the thirteen weeks ended May 29, 2005$267.2 ~~SG&A~~million ~~expenses~~ for the ~~fourteen~~thirteen weeks ended ~~May 30~~November 28, 2004 ~~include $0~~.3 ~~million of management fees paid to Apollo Management.~~

~~Royalties~~Sales of chemicals increased to $180.2 million in the thirteen weeks ended November 27, ~~Service~~2005, ~~Charges~~from ~~and~~$158.9 ~~Other~~million in the thirteen weeks ended November 28, 2004. Increased sales of herbicides (including ~~Income~~glyphosate products), insecticides, and ~~Expenses~~plant growth regulators were offset by lower fungicide sales. More specifically, shipments of Monsanto bulk herbicides increased compared to last year. These ~~items~~sales ~~include~~were ~~royalty~~transitioned ~~income~~from ~~generated~~commissioned byagent ~~our~~to direct ~~proprietary~~invoice ~~products~~transactions ~~group,~~during ~~service~~the ~~charge~~third ~~income~~quarter ~~paid~~of byfiscal ~~customers~~2005. ~~who~~Higher dovolumes ~~business~~of ~~with~~glyphosate usherbicides onmore ~~terms~~than offset lower end user unit prices for glyphosate products. Sales of fertilizer increased to $112.9 million in the thirteen weeks ended November 27, ~~and~~2005, ~~equity~~from ~~earnings~~$85.1 million in anthe ~~unconsolidated~~thirteen ~~subsidiary~~weeks ended November 28, 2004. The increase was due to both higher per ton pricing as well as ~~other~~ ~~items~~an increase in volumes sold. ~~Other~~Sales ~~income~~of seed increased to $714.89 million in the thirteen weeks ended ~~May 29~~November 27, 2005, from $214.75 million in the ~~fourteen~~thirteen weeks ended ~~May 30~~November 28, 2004. OfThe ~~the~~increase ~~total~~was primarily due to increased sales of wheat, rye, and alfalfa seeds offset by lower sales of grass seed in our non-crop markets compared to last year. Sales of other products increased to $515.1 million ~~increase~~in the thirteen weeks ended November 27, 2005, from $28.57 million ~~was~~in the thirteen weeks ended November 28, 2004, primarily due to ~~higher~~an ~~royalty~~increase ~~income~~in ~~during~~application ~~the~~fees and ~~thirteen~~additional ~~weeks~~transportation ~~ended~~revenue ~~May~~from ~~29,~~our ~~2005~~Canadian and Northern Plains locations.

~~Third~~Cost ~~Party~~of ~~Interest~~Goods ~~Expense~~Sold. ~~Interest~~ ~~expense~~Cost of goods sold was $5272.75 million in the thirteen weeks ended ~~May 29~~November 27, 2005, ~~which~~compared ~~related~~to ~~primarily~~$249.8 tomillion in the ~~8¼%~~thirteen ~~Senior~~weeks ~~Notes~~ended ~~and~~November 28, ~~our~~2004. ~~revolving~~Gross ~~credit~~profit ~~facility.~~(net ~~Interest~~sales ~~expense~~less ~~includes~~cost ~~interest~~of goods onsold) was $50.5 million in the ~~8¼%~~thirteen ~~Senior~~weeks ~~Notes~~ended November 27, ~~interest~~2005, ~~and fees~~compared onto $17.3 million in the ~~revolving~~thirteen ~~credit~~weeks ~~facility~~ended November 28, ~~and~~2004. ~~amortization~~Gross ofmargin ~~initial~~(gross ~~revolving~~profit ~~credit~~as ~~facility~~a ~~fees~~percentage ~~and~~of ~~costs~~net ~~relating~~sales) towas 15.6% in the ~~issuance~~thirteen ofweeks ended ~~the~~November 27, ~~8¼%~~2005, ~~Senior~~compared ~~Notes~~to 6.5% ~~For~~in the ~~fourteen~~thirteen weeks ended ~~May 30~~November 28, 2004,. ~~third~~The ~~party~~increase ~~interest~~in ~~expense~~gross profit dollars and gross margin percentage was ~~$8.4~~primarily due to higher rebate income, and improved upfront margins in chemical, ~~million~~seed, ~~related~~application and other categories. Our fertilizer gross margin percentage was down slightly compared to ~~interest~~last year due to higher per ton prices which diluted our gross margin percentage on higher fertilizer sales and gross profit dollars compared to last year. During the ~~8¼%~~third ~~Senior~~quarter ~~Notes~~of fiscal 2006, we achieved several crop year program goals with our ~~revolving~~major ~~credit~~chemical ~~facility~~vendors. This, ~~and~~along ~~interest~~with ~~paid~~other onfactors, allowed us to increase our rebate income accrual in the ~~final~~third ~~settlement~~quarter ~~payment~~of fiscal toyear ~~ConAgra~~2006 ~~Foods~~by an estimated amount of approximately $119.98 million. ~~The~~compared ~~fourteen~~to ~~weeks~~the ~~ended~~same ~~May~~period 30last year, ~~2004~~the ~~included~~majority ~~interest~~of ~~expense~~which ofwould ~~$2.7 million~~have onoccurred ~~obligations~~in ~~that~~our ~~were~~fourth noquarter. ~~longer~~The ~~outstanding~~increases ~~during~~in ~~the~~gross ~~thirteen~~profit ~~weeks~~were ~~ended~~partly ~~May~~offset ~~29,~~by ~~2005~~higher supply chain expenses. ~~This~~Significantly ~~includes~~higher ~~interest~~prices for fuel compared to ~~ConAgra~~last ~~Foods~~year ~~relating~~lead to higher costs on internal and third party freight. Our supplier rebates are accrued monthly based on actual sales at the ~~Acquisition~~most likely estimated rates by supplier, then finalized and ~~interest~~adjusted ~~relating~~as tonecessary, ~~$21~~typically in the third or fourth quarter.5 ~~million~~See ofthe ~~our~~discussion ~~8¼%~~in ~~Senior~~“Critical ~~Notes~~Accounting Policies and Estimates” on page 32 for further discussion of the factors which ~~were~~led to a higher level of rebates being ~~redeemed~~accrued ~~December~~in ~~2004~~the third quarter of 2006 as compared to the same quarter last year.

~~Finance~~Selling, ~~Related~~General and ~~Other~~Administrative ~~Charges~~Expenses. ~~Finance~~ ~~related~~Selling, general and ~~other~~administrative ~~charges~~(SG&A) ~~for~~expenses increased to $55.8 million in the ~~fourteen~~thirteen weeks ended ~~May~~November 27, 302005, from $47.9 million in the thirteen weeks ended November 28, 2004. SG&A expenses were 17.3% of sales during the thirteen weeks ended November 27, ~~consist~~2005, down from 17.9% of sales during the thirteen weeks ended November 28, 2004. The dollar increase in expenses was due to higher personnel costs and professional expenses associated with being an independent public company as well as increased insurance and fuel expenses compared to the thirteen weeks ended November 28, 2004. We experienced a 45% increase in combined gasoline and fuel expenses on comparable gallons used during the thirteen weeks ended November 27, 2005, resulting in a $1.94 million ~~transition~~increase ~~services~~compared ~~agreement~~to last year. The SG&A expenses ~~with~~for ~~ConAgra~~the ~~Foods~~thirteen ~~related~~weeks ended November 28, 2004 include $0.3 million of management fees paid to ~~the~~Apollo ~~Acquisition~~Management.

~~Income~~Restructuring ~~Taxes~~Costs. ~~The~~Restructuring ~~effective~~costs ~~income~~for ~~tax~~the ~~rate~~thirteen ~~was~~weeks ~~comparable~~ended ~~quarter~~November 27, ~~over~~2005, ~~quarter~~were at$1.0 39million compared to $0.7%9 ~~for~~million in the thirteen weeks ended ~~May 29~~November 28, 2004. The restructuring costs that occurred ~~2005~~during ~~versus~~the 39third quarter of fiscal 2006 were severance expenses and contract termination costs associated with our management reorganization and administrative consolidation announced on September 19, 2005.2% ~~for~~The restructuring costs that occurred in the ~~fourteen~~third ~~weeks~~quarter ~~ended~~of ~~May~~fiscal ~~30,~~2005 ~~2004~~were made up of severance and other associated costs with the closure of two formulation facilities.

November 27, 2005, from $6.1 million in the thirteen weeks ended November 28, 2004. Higher equity earnings from an unconsolidated subsidiary were offset by lower royalty and customer service charge income during the thirteen weeks ended November 27, 2005, compared to the thirteen weeks ended November 28, 2004. Royalties decreased during the quarter compared to last year due to the timing of our royalty income, some of which was recognized in the first and second quarters of this fiscal year. While our accounts receivable balance due from customers has increased due to higher sales this year, our income generated from customer service charges is lower due to an overall improvement in the age of those receivables which remain due.

Third Party Interest Expense. Interest expense decreased $0.4 million to $8.3 million in the thirteen weeks ended November 27, 2005, from $8.7 million for the thirteen weeks ended November 28, 2004. The decrease was due to interest relating to $21.5 million of 8¹/4% Senior Notes which were redeemed in December 2004.

Finance Related and Other Charges. There were no finance related and other charges during the thirteen weeks ended November 27, 2005. Finance related and other charges for the thirteen weeks ended November 28, 2004, were $7.9 million, consisting of $6.0 million in fees and expenses from an abandoned offering of income deposit securities which was expensed last year in the third quarter and $1.9 million in transition services agreement expenses with ConAgra Foods related to the Acquisition.

Income Taxes. The effective income tax rate was 35.2% for the thirteen weeks ended November 27, 2005, versus 38.9% for the thirteen weeks ended November 28, 2004. We file our fiscal year end income tax return during the third quarter. The lower relative tax benefit for the quarter’s loss was principally caused by the effects of truing up estimated tax return provisions of prior years when our fiscal year income tax returns were filed. These changes in estimate were a $0.4 million charge during the thirteen weeks ended November 27, 2005, as compared to a $0.9 million benefit during the thirteen weeks ended November 28, 2004.

Thirty-Nine Weeks Ended November 27, 2005, Compared to Forty Weeks Ended November 28, 2004

Net Sales. Sales increased to $2,437.5 million in the thirty-nine weeks ended November 27, 2005, compared to $2,229.6 million for the forty weeks ended November 28, 2004. Sales of proprietary chemical and seed products were 14.5% of total chemical and seed sales in the thirty-nine weeks ended November 27, 2005, compared to 14.2% for the forty weeks ended November 28, 2004, reflecting our strategy to grow sales of proprietary products.

Sales of chemicals increased to $1,474.2 million in the thirty-nine weeks ended November 27, 2005, from $1,416.6 million in the forty weeks ended November 28, 2004. Share gains in the Midwest, Texas, the Midsouth and the Southeast, helped overcome lower non-crop sales and slightly lower chemical tolling revenue due to the closing of two non-strategic formulation facilities that had provided toll-manufacturing services. Also, we now bill directly Monsanto bulk herbicides, which during the first two quarters of fiscal 2005 were commissioned agent transactions. Higher volumes of glyphosate herbicides more than offset lower end user unit prices for glyphosate products, while insecticide and fungicide treatments were up compared to last year due to an increase in disease and insect infestations. Sales of fertilizer increased to $596.1 million in the thirty-nine weeks ended November 27, 2005, from $494.4 million in the forty weeks ended November 28, 2004. The increase was due to higher pricing, on slightly higher volumes compared with last year. The small growth in our fertilizer volumes is due to lower in season applications as a result of higher prices, offset by higher early season fertilizer applications that normally occur in the fall and winter but were delayed into the spring due to wet weather. Sales of seed increased to $313.9 million in the thirty-nine weeks ended November 27, 2005, from $274.5 million in the forty weeks ended November 28, 2004. The increase was due primarily to sales growth on both third party and proprietary brands and higher prices due to increased sales of seed with enhanced traits. Sales of other products increased to $53.2 million in the thirty-nine weeks ended November 27, 2005, from $44.2 million in the forty weeks ended November 28, 2004, due to an increase in application fees and additional transportation revenue from our Canadian and Northern Plains locations.

Cost of Goods Sold. Cost of goods sold was $2,107.9 million in the thirty-nine weeks ended November 27, 2005, compared to $1,969.5 million in the forty weeks ended November 28, 2004. Gross profit (net sales less cost of goods sold) was $329.6 million in the thirty-nine weeks ended November 27, 2005, compared to $260.1 million in the forty weeks ended November 28, 2004. Gross margin (gross profit as a percentage of net sales) was 13.5% in the thirty-nine weeks ended November 27, 2005, compared to 11.7% in the forty weeks ended November 28, 2004. The increase in gross profit and gross margin was due partially to an increase in cost of sales of $17.4 million in the forty weeks ended November 28, 2004, resulting from purchase accounting for the Acquisition. At the Acquisition, the inventory on our books was written up $21.1 million to fair market value. As this inventory was sold, it increased cost of sales by $17.4 million in the forty weeks ended

November 28, 2004. During the third quarter of fiscal 2006, we achieved several crop year program goals with our major chemical vendors. This, along with other factors, allowed us to increase our year to date rebate income accrual compared to the same period last year by an estimated amount of approximately $15.4 million. The remaining increase in gross profit was primarily due to growth in seed and fertilizer sales, and growth in insecticide and fungicide sales. These gains were partially offset by some erosion in the profitability of glyphosate herbicides and plant growth regulators. Gross profit includes supplier rebates, which are accrued monthly based on actual sales at the most likely estimated rates by supplier, then adjusted as necessary, typically in our third or fourth quarter. See the discussion in “Critical Accounting Policies and Estimates” on page 32 for further discussion of the factors which led to a higher level of rebates being accrued in through the third quarter of 2006 as compared to the same period last year.

Selling, General and Administrative Expenses. Selling, general and administrative (SG&A) expenses increased to $214.1 million in the thirty-nine weeks ended November 27, 2005, from $201.0 million in the forty weeks ended November 28, 2004. SG&A expenses decreased slightly to 8.8% of sales during the thirty-nine weeks ended November 27, 2005, down from 9.0% of sales during the forty weeks ended November 28, 2004. The dollar increase in expenses was due to higher personnel costs and professional expenses associated with becoming an independent public company, higher insurance costs, fewer recoveries of bad debt, and increased vehicle expenses including fuel. These increases were partially offset by having one less week of operating expenses in the thirty-nine weeks ended November 27, 2005. The SG&A expenses for the forty weeks ended November 28, 2004 include $0.8 million of management fees paid to Apollo Management.

Restructuring Costs. Restructuring costs for the thirty-nine weeks ended November 27, 2005, were $1.5 million compared to $0.9 million in the forty weeks ended November 28, 2004. The restructuring costs related to fiscal 2006 are made up of severance expenses and contract termination costs associated with our management reorganization and administrative consolidation announced on September 19, 2005, as well as contract termination costs and other associated costs with the closure of two formulation facilities. The restructuring costs occurring in fiscal year 2005 were made up of severance and other associated costs with the closure of two formulation facilities.

Royalties, Service Charges and Other Income and Expenses. These items include royalty income generated by our proprietary products group, service charge income paid by customers who do business with us on terms, and equity earnings in an unconsolidated subsidiary, as well as other items. Other income increased to $20.7 million in the thirty-nine weeks ended November 27, 2005, from $18.8 million in the forty weeks ended November 28, 2004. The increase was due to higher royalty income during the thirty-nine weeks ended November 27, 2005, slightly offset by a gain on a post closing settlement of an acquisition during the forty weeks ended November 28, 2004. Higher royalties are a result of the market success of those products from which we receive royalty payments. Additionally, lower service charge income, due to an overall improved accounts receivable portfolio, was partially offset by increased equity earnings in an unconsolidated subsidiary as compared to last year.

Third Party Interest Expense. Interest expense decreased $4.5 million to $20.4 million in the thirty-nine weeks ended November 27, 2005, compared to $24.9 million for the forty weeks ended November 28, 2004. The forty weeks ended November 28, 2004, included interest expense relating to $21.5 million of the 8¹/4% Senior Notes redeemed in December 2004, and $1.9 million of interest paid to ConAgra Foods for the acquisition. Interest expense on the revolving credit facility decreased by $0.9 million during the thirty-nine weeks ended November 27, 2005, compared to the forty weeks ended November 28, 2004. The impact of lower average daily revolving balances was partially offset by rising interest rates over the last thirty-nine weeks compared to the prior year.

Finance Related and Other Charges. There were no finance related and other charges during the thirty-nine weeks ended November 27, 2005. Finance related and other charges for the forty weeks ended November 28, 2004, were $11.7 million. These charges for the forty weeks ended November 28, 2004, consist of $6.0 million in fees and expenses from an abandoned offering of income deposit securities which was expensed last year in the third quarter and $5.7 million in transition services agreement expenses with ConAgra Foods related to the Acquisition.

Income Taxes. The effective income tax rate was 40.1% for the thirty-nine weeks ended November 27, 2005, versus 38.7% for the forty weeks ended November 28, 2004. We file our fiscal year end income tax return during the third quarter. Adjustments of our fiscal 2004 and 2005 income tax provisions, which are based in part on estimates, to the actual filed tax returns was the principal cause of the change in tax rates for the thirty-nine weeks ended November 27, 2005, and the forty weeks ended November 28, 2004. These changes in estimate were a $0.4 million charge during the three quarters ended November 27, 2005, as compared to a $0.9 million benefit during the three quarters ended November 28, 2004.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our principal liquidity requirements are for working capital, consisting primarily of receivables, inventories, ~~pre-paid~~prepaid expenses, reduced by accounts payable and accrued expenses;, capital expenditures;, debt service;, and dividends on our common stock. We will fund our liquidity needs, including dividend payments, with cash generated from operations and, to the extent necessary, through borrowings under our revolving credit facility. In addition, we expect to fund any growth capital expenditures with cash generated from operations, reductions in working capital and incremental debt.

At May 29, 2005, we had no short-term debt outstanding under our revolving credit facility compared to an outstanding balance of $42.1 million at May 30, 2004. The revolving credit facility is included in our financial statements as short-term debt. We believe that our cash flows from operating activities and borrowing capabilities under our revolving credit facility will be sufficient to meet our liquidity requirements in the foreseeable future, including funding of capital expenditures, debt service payments, and our intended dividend payments on our common stock. If our cash flows from operating activities are insufficient to fund dividend payments at intended levels, we will need to reduce or eliminate dividends or, to the extent we are permitted to do so under our debt agreements, fund dividends with borrowings or from other sources. If we use working capital or permanent borrowings to fund dividends, we will have less cash available for future dividends and other purposes, which could negatively impact our financial condition, our results of operations and our ability to maintain or expand our business. Additionally, our revolving credit facility will mature in 2008. If we are unable to refinance such indebtedness prior to its stated maturity, we will be required to use cash to repay such indebtedness, and we may not have sufficient cash available to us at that time. Even if we have sufficient cash, such a repayment would sufficiently decrease the amount of cash, if any, that is available to pay dividends.

negatively impact our financial condition, our results of operations and our ability to maintain or expand our business. Additionally, our revolving credit facility will mature in 2008. If we are unable to refinance such indebtedness prior to its stated maturity, we will be required to use cash to repay such indebtedness, and we may not have sufficient cash available to us at that time. Even if we have sufficient cash, such a repayment would sufficiently decrease the amount of cash, if any, that is available to pay dividends.

Cash Flows

Our ongoing operations require availability of funds to service debt, fund working capital and meet capital expenditure requirements. We currently finance and expect to continue to finance these activities through cash flows from operations and from amounts available under our revolving credit facility.

Cash flows used in operating activities totaled $58179.94 million in the ~~thirteen~~thirty-nine weeks ended ~~May 29~~November 27, 2005, compared to $~~204~~273.87 million in the ~~fourteen~~forty weeks ended ~~May 30~~ November 28, 2004. The improvement in net cash used in operating activities in the current period versus the prior period is ~~primarily~~ due primarily to the improvement in net income of $44.2 million, better overall payment terms from suppliers, and a change in the timing of prepayments to chemical and seed suppliers. We made larger prepayments to chemical and seed suppliers in the fourth quarter of fiscal 2005, ~~significantly~~ reducing payment obligations to such suppliers in the ~~thirteen~~thirty-nine weeks ended ~~May 29~~ November 27, 2005. However, in the fourth quarter of fiscal 2004, we decided not to make significant prepayments to suppliers. Instead, we primarily paid on regular trade terms during the ~~fourteen~~forty weeks ended ~~May 30~~November 28, 2004, resulting in more payments to suppliers. This was partially offset by higher trade receivables from increased sales and higher inventories. Inventories were up due to higher levels of fungicide products and higher fertilizer inventory levels resulting from increased fertilizer ~~cost~~costs ~~and~~per ~~slightly delayed markets in the mid-south due to weather~~ton.

Cash flows used in investing activities totaled $27.16 million for ~~both~~ the ~~thirteen~~thirty-nine weeks ended ~~May 29~~November 27, 2005, and $64.7 million for the ~~fourteen~~forty weeks ended ~~May 30~~November 28, 2004. Additions to property, plant and equipment were $310.2 million in the ~~thirteen~~thirty-nine weeks ended ~~May 29~~ November 27, 2005, compared to $3.9.4 million in the ~~fourteen~~forty weeks ended ~~May 30~~November 28, 2004. Capital spending during the ~~thirteen~~thirty-nine weeks ended ~~May 29~~November 27, 2005 was for a variety of projects; the largest was related to a fertilizer terminal expansion project. During the forty weeks ended November 28, 2004, the company made the final acquisition payment to ConAgra Foods for $58.2 million.

Cash flows provided by financing activities were $28152.70 million in the ~~thirteen~~thirty-nine weeks ended ~~May 29~~November 27, 2005, compared to $61168.5 4 million in the ~~fourteen~~forty weeks ended ~~May 30~~November 28, 2004. Cash flows provided by financing activities ~~for May 30, 2004,~~ reflect borrowings under our revolving credit facility used to accommodate ~~the~~our seasonal working capital needs ~~of our business~~. We actively manage our cash balances which results in check float on zero balance accounts. The ~~cash~~net ~~flows~~change ~~provided~~in ~~by our check~~ float was $238.61 million and $1916.48 million for the periods ending ~~May 29~~November 27, 2005, and ~~May 30~~November 28, 2004, respectively. We paid dividends to our stockholder of $14.5 million for the thirty-nine weeks ended November 27, 2005 compared to $60.0 million paid in the forty weeks ended November 28, 2004. These dividends funded our stockholder’s dividend to its shareholders.

Credit Facility. At ~~May 29~~November 27, 2005, there was $~~500~~486.09 million of ~~borrowing~~ borrowing availability under the revolving credit facility and weUnited Agri Products, Inc. had borrowing capacity ~~thereunder~~ of $~~475~~464.84 million after giving effect to $2422.25 million of letters of credit under the sub-facility. At November 27, 2005, we had $149.0 million in short-term debt outstanding under our revolving credit facility compared to an outstanding balance of $211.6 million at November 28, 2004.

~~Since~~30 inception of the credit facility, we have been in compliance with the financial covenants. During the fifty-two weeks ended May 29, 2005, outstanding borrowings (net of cash on hand) reached a period end peak of $275.2 million on October 24, 2004, while cash on hand reached a period end peak of $48.2 million on February 27, 2005. Our average period end borrowings (net of cash on hand) for the fifty-two week period ended May 29, 2005, were approximately $100.1 million.

Obligations and Commitments

As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as lease agreements, debt agreements and unconditional purchase obligations (i.e., obligations to transfer funds in the future for fixed or minimum quantities of goods or services at fixed or minimum prices, such as “take-or-pay” contracts). We enter into unconditional purchase obligation arrangements in the normal course of business to ensure that adequate levels of sourced product are available to us. There were no material changes outside of the ordinary course of business during the thirteen weeks ended May 29, 2005.

~~UAP~~Since ~~Holding~~inception ~~Corp~~of the credit facility, we have been in compliance with its financial covenants.’s ~~Dependence~~During the fifty-two weeks ended November 27, 2005, outstanding borrowings (net of cash on Ushand) toreached ~~Service~~a ~~it’s~~period ~~Obligations~~end peak of $276.3 million on October 23, 2005, while cash on hand reached a period end peak of $57.6 million on August 28, 2005. Our average period end borrowings (net of cash on hand) for the fifty-two week period ended November 27, 2005, were approximately $36.6 million.

AsObligations ~~a holding company with no significant assets other than the ownership of 100% of our common stock, UAP Holding Corp. depends on our cash flows to service its debt~~ and toCommitments pay dividends (if any) on its common stock. UAP Holding Corp. intends to pay quarterly cash dividends on its common stock at an annual rate of $0.50 per share. The declaration of such dividends is at the complete discretion of UAP Holding Corp.’s board of directors, and depends upon many factors, including its financial condition, earnings, legal requirements, restrictions in its debt agreement, and other factors that its board of directors deems relevant. Because our parent, UAP Holding Corp., is a holding company, its primary source of funds to fund its dividend payments will be cash distributions received from us. To the extent we make such distributions to UAP Holding Corp., the amount of cash available to us to pay principal of, and interest on, our outstanding debt, including the 8¼% Senior Notes, will be reduced, and we would have less cash available for other purposes, which could negatively impact our financial condition, our results of operations and our ability to maintain or expand our business. A failure to pay principal of, or interest on, our debt, including the 8¼% Senior Notes, would constitute an event of default under the applicable debt agreements, giving the holders of that debt the right to accelerate its maturity. If any of our debt is accelerated, we may not have sufficient cash available to repay it in full and we may be unable to refinance it on satisfactory terms or at all.

~~UAP Holding Corp. is substantially more leveraged than us.~~ As ofpart ~~May 29, 2005, UAP Holding Corp. had $298.5 million~~ of ~~total~~our ~~indebtedness.~~ongoing ~~As described above~~operations, ~~UAP~~we ~~Holding~~enter ~~Corp.~~into ~~will~~arrangements ~~rely~~that onobligate ~~distributions from~~ us ~~in order~~ to ~~pay~~make ~~amounts~~future ~~due in respect of its 10¾% Senior Discount Notes due 2012, (which will require cash interest~~ payments atunder ~~the~~contracts ~~rate~~such ofas ~~10¾%~~lease ~~per annum~~agreements, ~~commencing~~debt onagreements ~~July 15, 2008)~~ and unconditional topurchase ~~pay~~obligations ~~dividends, if any, on its outstanding common stock~~(i. ~~However~~e., ~~our~~obligations ~~ability~~ to ~~make~~transfer ~~distributions~~funds ~~to UAP Holding Corp. is restricted by covenants contained~~ in ~~our revolving credit facility and~~ the ~~indenture~~future ~~governing~~for ~~the~~fixed ~~8¼%~~or ~~Senior~~minimum ~~Notes.~~quantities ~~While the restrictions in the indenture governing the 8¼% Senior Notes cover a wide variety~~ of ~~arrangements~~goods ~~which~~or ~~have traditionally~~services ~~been~~at ~~used~~fixed toor ~~effect~~minimum ~~highly leveraged transactions~~prices, ~~the~~such ~~indenture~~as ~~governing~~“take-or-pay” ~~the~~contracts). ~~8¼%~~We ~~Senior~~enter ~~Notes~~into ~~may~~unconditional ~~not~~purchase obligation ~~afford~~arrangements ~~the holders of the 8¼% Senior Notes protection~~ in ~~all circumstances from~~ the ~~adverse~~normal ~~aspects~~course of abusiness ~~highly~~to ~~leveraged transaction,~~ensure ~~reorganization,~~that ~~restructuring,~~adequate ~~merger~~levels orof ~~similar~~sourced ~~transaction.~~product ~~While~~are ~~UAP~~available ~~Holding~~to ~~Corp~~us. ~~has~~There nowere ~~current intention to engage in these types of transactions, there can be~~ no ~~assurance~~material ~~that~~changes itoutside ~~will not do so in~~ the ~~future~~ordinary ifcourse ~~permitted under the terms~~ of ~~the~~business ~~revolving~~during ~~credit facility and~~ the ~~indenture~~thirteen ~~governing~~or ~~the~~thirty-nine ~~8¼%~~weeks ~~Senior~~ended November 27, ~~Notes~~2005.

UAP Holding Corp.’s Dependence on Us to Service its Obligations

As a holding company with no significant assets other than the ownership of 100% of our common stock, UAP Holding Corp. depends on our cash flows to service its debt and to pay dividends (if any) on its common stock. UAP Holding Corp. intends to pay quarterly cash dividends on its common stock at an annual rate of $0.75 per share. The declaration of such dividends is at the complete discretion of UAP Holding Corp.’s board of directors, and depends upon many factors, including its financial condition, earnings, legal requirements, restrictions in its debt agreement, and other factors that its board of directors deems relevant. Because our parent, UAP Holding Corp., is a holding company, its primary source of funds to fund its dividend payments will be cash distributions received from us. To the extent we make such distributions to UAP Holding Corp., the amount of cash available to us to pay principal of, and interest on, our outstanding debt, including the 8¹/4% Senior Notes, will be reduced, and we would have less cash available for other purposes, which could negatively impact our financial condition, our results of operations and our ability to maintain or expand our business. A failure to pay principal of, or interest on, our debt, including the 8 ¹/4% Senior Notes, would constitute an event of default under the applicable debt agreements, giving the holders of that debt the right to accelerate its maturity. If any of our debt is accelerated, we may not have sufficient cash available to repay it in full and we may be unable to refinance it on satisfactory terms or at all.

UAP Holding Corp. is substantially more leveraged than us. As of November 27, 2005, UAP Holding Corp. had $452.7 million of total indebtedness. As described above, UAP Holding Corp. will rely on distributions from us in order to pay amounts due in respect of its 10³/4% Senior Discount Notes due 2012, (which will require cash interest payments at the rate of 10³/4% per annum, commencing on July 15, 2008) and to pay dividends, if any, on its outstanding common stock. However, our ability to make distributions to UAP Holding Corp. is restricted by covenants contained in our revolving credit facility and the indenture governing the 8¹/4% Senior Notes. While the restrictions in the indenture governing the 8¹/4% Senior Notes cover a wide variety of arrangements which have traditionally been used to effect highly leveraged transactions, the indenture governing the 8¹/4% Senior Notes may not afford the holders of the 8¹/4% Senior Notes protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction. While UAP Holding Corp. has no current intention to engage in these types of transactions, there can be no assurance that it will not do so in the future if permitted under the terms of the revolving credit facility and the indenture governing the 8¹/4% Senior Notes.

Dividend Policy

WeCurrently we intend to pay quarterly cash dividends on our common stock sufficient to provide UAP Holding Corp. with the funds necessary to pay the dividends ~~they~~it may declare. On ~~April 29~~October 6, 2005, our board declared a quarterly dividend on our common stock in the amount of $68.3 2 million. The record date for the dividend payment was ~~May 13~~November 15, 2005, and the payment date was December 1, 2005. We paid a $6.3 million dividend on June 1, 2005 and a $8.2 million dividend on September 1, 2005.

There are no assurances that we will declare or pay any cash dividends in the future. The declaration and payment of future dividends to ~~holders of~~ our common stock holder is at the discretion of our board of directors and depends upon many factors, including our financial condition, earnings, legal requirements, restrictions in our debt agreements and other factors our board of directors deems relevant. The terms of our indebtedness, including the revolving credit facility and the indentures governing the 8¼ 1/4% Senior Notes, may also restrict us from paying cash dividends on our common stock under some circumstances.

In31 the past, cash flow provided by our operating activities has been highly variable, resulting in negative cash flow during certain periods. Because of the variability, if our cash flows from operating activities are insufficient to fund dividend payments at intended levels, we may need to reduce or eliminate dividends or, to the extent permitted by our debt agreements fund all or part of the dividends with additional debt or other sources of cash. To the extent we pay dividends, the amount of cash available to us to pay principal of, and interest on, our outstanding debt will be reduced. A failure to pay principal of, or interest on, our debt would constitute an event of default under the applicable debt agreements, giving the holders of the debt the right to accelerate its maturity. If any of our debt is accelerated, we may not have sufficient cash available to repay it in full and we may be unable to refinance it on satisfactory terms or at all. An event of default under debt agreements, or an acceleration of the debt hereunder, could also trigger an event of default under other debt agreements. Furthermore, if we fund dividends with additional debt, our interest expense will increase, which may cause a further reduction in the amount of cash available to us. Subject to certain restrictions in the indenture governing the 8¼% Senior Notes, additional debt could be secured and therefore effectively senior to the 8¼% Senior Notes.

~~Critical~~Cash ~~Accounting~~flow ~~Policies~~provided by our operating activities is highly variable due to the seasonality of our business, resulting in negative cash flow during certain periods. Because of the variability, if our cash flows from operating activities are insufficient to fund dividend payments at intended levels, we may need to reduce or eliminate dividends or, to the extent permitted by our debt agreements fund all or part of the dividends with additional debt or other sources of cash. To the extent we pay dividends, the amount of cash available to us to pay the principal and interest on our outstanding debt will be reduced. A failure to pay the principal or interest on our debt would constitute an event of default under the applicable debt agreements, giving the holders of the debt the right to accelerate its maturity. If any of our debt is accelerated, we may not have sufficient cash available to repay it in full and we may be unable to refinance it on satisfactory terms or at all. An event of default under debt agreements, or an acceleration of the debt, could also trigger an event of default under other debt agreements. Furthermore, if we fund dividends with additional debt, our interest expense will increase, which may cause a further reduction in the amount of cash available for operations. Subject to certain restrictions in the indenture governing the 8 1/4% Senior Notes, additional debt could be secured and therefore effectively be senior to the 8 1/4% Senior Notes.

~~The~~CRITICAL ~~process~~ACCOUNTING ofPOLICIES ~~preparing~~AND ~~financial~~ESTIMATES statements requires the use of estimates on the part of management. The estimates used by management are based on our historical experiences combined with management’s understanding of current facts and circumstances. Certain of our accounting policies are considered critical as they are both important to the portrayal of our financial condition and results of operations and require significant or complex judgment on the part of management. There has been no material change in accounting policies considered critical by our management. However, we have refined our methodology for estimating chemical rebates receivable.

Our financial statements and accompanying notes are prepared in accordance with U.S. GAAP. The process of preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results could differ from these estimates, and changes in these estimates are recorded when known. The estimates and assumptions performed by management are based on our historical experiences combined with management’s understanding of current facts and circumstances. Certain of our accounting policies are considered critical as they are both material to the portrayal of our financial condition and results of operations and require significant or complex judgment on the part of management. The critical judgments by management relate to the allowance for doubtful accounts, inventory valuation, impairment of long-lived assets, goodwill and intangible assets and earnings from vendor rebate programs. There has been no material change in accounting policies considered critical by our management. However we have refined our methodology for estimating chemical rebates earned in response to changes in supplier rebate programs through the use of an internally developed tracking system. Under GAAP, rebates are recorded when it is probable that we will earn the rebate, the amount is reasonably estimable and the rebate is covered by a written agreement with the supplier. Due to a combination of factors as compared to last year - changes in vendor programs, our new rebate tracking system, and improvements in operating performance that have led to greater probability of achieving higher rebate levels –we have accrued more rebate earnings in and through the third quarter of 2006 as compared to the same periods in 2005, which has partially contributed to our improved operating results. Decisions as to when and how much rebate earnings should be recorded are estimates, which require significant judgment by management, based on an analysis of vendor programs (especially those with tiered levels of rebates which can be earned), operating performance to date, and expectations of operating performance for the balance of the crop year, all of which can vary from year-to-year. Because the “probable” and “reasonably estimable” concepts imply that a relatively high level of assurance should exist before accruing rebates, true-ups of rebate accruals, if required, will tend to be positive. Where uncertainty exists such that the rebate is not reasonably estimated or probable, rebates are recognized as the related milestones are achieved. Given our operating cycle and the crop-year basis of all significant rebate programs, true-ups of rebate accruals, if required, usually occur in the third or fourth quarter of the year. During fiscal 2006, significant true-ups were made in the third quarter, as compared to the fourth quarter in fiscal 2005. As a result, we expect that our fourth quarter operating results this year will not be as strong as the same period in fiscal 2005.

Forward-Looking Statements

This ~~Report~~report includes “forward-looking statements” that involve risks and uncertainties. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information and, in particular, appear under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” When used in this ~~Report~~report, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “foresees,” “likely,” “may,” “should,” “goal,” “target,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon information available to us on the date of this ~~Report~~report.

These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control that could cause actual results to differ materially from the results discussed in the forward-looking statements ~~including, among other things, the matters discussed in this~~ ~~Report under this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Such risks, uncertainties and other factors may include, among others:~~

including, among other things, the matters discussed in this report under this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Such risks, uncertainties and other factors may include, among others:

•

general economic and business conditions;

•

industry trends;

•

restrictions contained in our debt agreements;

•

our substantial leverage, including the inability to generate the necessary amount of cash to service our existing debt and the incurrence of substantial indebtedness in the future;

•

the seasonality of our business and weather conditions;

•

the possibility of liability for pollution and other damage that is not covered by insurance or that exceeds our insurance coverage;

•

increased competition in the markets in which we operate;

•

our dependence on rebate programs to attain profitability;

•

our dependence on a limited number of key executives who we may not be able to adequately replace if they leave our company;

•

changes in government regulations, agricultural policy and environmental, health and safety laws and regulations;

•

changes in business strategy, development plans or cost savings plans;

•

the loss of any of our major suppliers or the bankruptcy or financial distress of our customers;

•

the ability to attain and maintain any price increases for our products;

•

availability, terms and deployment of capital; and

•

other factors over which we have little or no control.

These risks and certain other uncertainties are discussed in more detail in our Annual Report on Form 10-K for the fiscal year ended February 27, 2005 under the caption “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors.”

There may be other factors, including those discussed elsewhere in this ~~Report~~report, which could cause our actual results to differ materially from the results referred to in the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this ~~Report~~report and are expressly qualified in their entirety by the cautionary statements included in this ~~Report~~ report. We undertake no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risks affecting our business are exposure to changes in energy prices, foreign currency risks, and interest rate risks.

Our average period end borrowings under the revolving credit agreement (net of cash on hand) for the fifty-two week period ended ~~May 29~~November 27, 2005, were approximately $~~100~~36.16 million. The revolving credit facility is affected by changes in interest rates. Based upon the amount of our average period end borrowings (net of cash on hand) for the fifty-two week period ended ~~May 29~~November 27, 2005, a one percentage point change in the assumed weighted average interest rate on such credit facility would change our annual interest expense by $1.0.4 million.

Our foreign currency risk is limited primarily to the exchange rate differential in the Canadian and US dollar. The exchange rate was 0.8553, 0.8074, and 0.8483, at November 27, 2005, February 27, 2005, and November 28, 2004, respectively. The exchange rate has been between 0.7851 and 0.8658 for the thirty-nine weeks ended November 27, 2005. A 1% change in the exchange rate has approximately a $0.4 million impact on the balance sheet value.

Changes in energy prices have a direct impact on our fuel costs. The national average per gallon price of diesel fuel has increased from approximately $2.12 to $2.48 and gasoline has increased from $1.90 to $2.13 as of November 28, 2004 and November 27, 2005, respectively. These price increases impact our supply chain and selling expenses. Based on our usage mix of these two fuels, we estimate that on average we have experienced nearly a 31% increase in fuel prices year over year through the third quarter. Based on our historic usage, a $0.15 increase in the annual average per gallon price of fuel would increase our fuel expense by $1.0 million. Higher fuel prices also affect our customers such that higher expenses for fuel and higher prices for fertilizer inputs may reduce the cash or credit available to our customers with which they purchase other inputs or services from us.

Our on hand inventory of fertilizer products has price risk related to changes in energy prices. Our total fertilizer inventories on hand were approximately $104.1 million, $120.5 million and $80.1 million as of November 27, 2005, February 27, 2005 and November 28, 2004, respectively. Of our total fertilizer inventory approximately $45.5 million, $64.1 million and $44.6 million as of November 27, 2005, February 27, 2005 and November 28, 2004 were considered by the fertilizer industry to be nitrogen based and therefore price sensitive to the price of natural gas. Natural gas is the key ingredient in the manufacture of these products. While a direct relationship cannot be established due to alternative sources of fertilizer products, such as imports, or substitute products, price risk does exist.

ITEM 4.

CONTROLS AND PROCEDURES.

As of the end of the period covered by this ~~Report~~report, we evaluated the effectiveness of the design and operation of our “disclosure controls and procedures” as they related to our business (“Disclosure Controls”). This evaluation (“Controls Evaluation”) was done under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).

Our management, including the CEO and CFO, does not expect that our Disclosure Controls or our “internal controls over financial reporting” (“Internal Controls”) will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Based upon the Controls Evaluation, the CEO and CFO have concluded that the Disclosure Controls are effective as of the end of the period covered by this ~~Report~~report. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date we carried out this evaluation. In addition, there have been no changes in our internal control over financial reporting that have occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.

ITEM 6.

EXHIBITS



31.1		Certification of Chief Executive Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~July 12~~January 11, ~~2005~~2006


UNITED AGRI PRODUCTS, INC. (Registrant)

By:		/s/ David W. Bullock
		David W. Bullock Executive Vice President and Chief Financial Officer (Principal Financial Officer and duly authorized signatory on behalf of Registrant)

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