10QSB

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

_______________

Form 10-QSB
_______________

(Mark One)

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

For the quarterly period ended December 29, 2007

OR

[  ] 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 0-20539

PRO-FAC COOPERATIVE, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)

New York	16-6036816
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification Number)
590 Willow Brook Office Park, Fairport, NY	14450
(Address of Principal Executive Offices)	(Zip Code)

Issuer's Telephone Number, Including Area Code (585) 218-4210

(Former name, former address and former fiscal year, if changed since last report

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the 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 registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES                      NO      X     

State the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. As of November 2, 2007.

Common Stock – 1,769,540

Transitional Small Business Disclosure Format                YES                      NO      X     

FORM 10-QSB
For the Quarterly Period Ended December 29, 2007
PRO-FAC COOPERATIVE, INC.
TABLE OF CONTENTS

		PAGE
	PART I.      FINANCIAL INFORMATION
ITEM 1.	Financial Statements	2
ITEM 2.	Management’s Discussion and Analysis or Plan of Operation	11
ITEM 3.	Controls and Procedures	15
	PART II.      OTHER INFORMATION
ITEM 1.	Legal Proceedings	16
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
ITEM 3.	Defaults Upon Senior Securities	16
ITEM 4.	Submission of Matters to a Vote of Security Holders	16
ITEM 5.	Other Information	16
ITEM 6.	Exhibits	17

1

PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

Unaudited condensed financial statements of Pro-Fac Cooperative, Inc. (“Pro-Fac” or “the Cooperative”) as of December 29, 2007 and for the three and six month periods ended December 29, 2007 and December 23, 2006 are presented on the following pages. The financial statements have been prepared in accordance with the Cooperative’s usual accounting policies, are based, in part, on estimates and reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results of the interim periods.

This Part I also includes management’s discussion and analysis of the Cooperative’s financial condition as of December 29, 2007 and its results of operations for the three and six month periods ended December 29, 2007.

Pro-Fac Cooperative, Inc.
Condensed Statements of Income
(Unaudited)

(Dollars in Thousands)

	Three Months Ended							Six Months Ended
	December 29,			December 23,			December 29,			December 23,
	2007			2006			2007			2006
Net sales	$	62		$	2,072		$	909		$	2,880
Cost of sales		(74	)		(1,943	)		(912	)		(2,776	)
Gross profit/(loss)		(12	)		129			(3	)		104
Gain from transaction with Birds Eye Foods, Inc.
and related agreements		0			1,200			1,200			3,600
Margin on delivered product		105			54			129			112
Selling, administrative and general expense		(423	)		(329	)		(864	)		(671	)
Other income		8			2			17			2
Operating income/(loss)		(322	)		1,056			479			3,147
Distribution from Holdings LLC		0			0			116,594			0
Investment income		717			61			2,109			118
Interest expense		0			(25	)		(3	)		(37	)
Income before income taxes		395			1,092			119,179			3,228
Income tax benefit/(provision)		590			(292	)		710			(828	)
Net income	$	985		$	800		$	119,889		$	2,400

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

2

Pro-Fac Cooperative, Inc.
Condensed Balance Sheets
(Unaudited)
(Dollars in Thousands)
ASSETS
	December 29,
	2007
Current assets:
Cash and cash equivalents	$	21,321
Investments		12,312
Accrued interest receivable		157
Accounts receivable, trade		12,923
Accounts receivable from Birds Eye Foods, Inc.		6,572
Income taxes receivable		295
Inventory		2,212
Prepaid expenses and other current assets		110
Total current assets		55,902
Fixed assets, net		11
Investment in Farm Fresh First, LLC		50
Total assets	$	55,963
LIABILITIES AND SHAREHOLDERS’ AND MEMBERS’ SURPLUS
Current liabilities:
Accounts payable	$	492
Other accrued expenses		1,304
Due to Farm Fresh First LLC		46
Amounts due members		23,295
Total current liabilities		25,137
Commitments and contingencies (Note 5)
Common stock, par value $5, authorized - 5,000,000 shares; issued
and outstanding 1,769,540 shares		8,848
Shareholders’ and members’ surplus:
Class A cumulative preferred stock, liquidation preference
$25 per share, authorized 10,000,000 shares; issued and
outstanding 1,773,839 shares		44,346
Special membership interests		21,733
Accumulated deficit		(44,101	)
Total shareholders’ and members’ surplus		21,978
Total liabilities and shareholders’ and members’ surplus	$	55,963

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

3

Pro-Fac Cooperative, Inc.
Condensed Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
	Six Months Ended
	December 29,			December 23,
	2007			2006
Cash Flows from Operating Activities:
Net income	$	119,889		$	2,400
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation		2			2
Gain from transaction with Birds Eye Foods, Inc. and related agreements		(1,200	)		(3,600	)
Change in assets and liabilities:
Investments		(12,312	)		0
Accounts receivable		(3,202	)		(11,832	)
Accounts payable and other accrued expenses		1,473			316
Accrued income taxes		(710	)		663
Accrued interest expense		(88	)		0
Amounts due members		4,634			12,680
Other assets		(2,412	)		(276	)
Net cash provided by operating activities		106,074			353
Cash Flows from Investing Activities:
Proceeds from Termination Agreement with Birds Eye Foods, Inc.		2,000			6,000
Distribution from Holdings LLC classified as a return of capital		3,524			0
Net cash provided by investing activities		5,524			6,000
Cash Flows from Financing Activities:
Borrowings on (repayment of) long-term debt		(1,000	)		1,000
Redemption of retained earnings allocated to members		(6,771	)		0
Cash dividends paid		(7,512	)		0
Redemption of preferred stock		(79,576	)		(3,194	)
Net cash used in financing activities		(94,859	)		(2,194	)
Net change in cash and cash equivalents		16,739			4,159
Cash and cash equivalents at beginning of period		4,582			2,391
Cash and cash equivalents at end of period	$	21,321		$	6,550
Non-Cash Investing Activities:
Increase in investment in Holdings LLC and equity	$	0		$	5,582

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

4

PRO-FAC COOPERATIVE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE 1.      DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business: Pro-Fac Cooperative, Inc. ("Pro-Fac" or the "Cooperative") is a New York agricultural cooperative corporation operating in one segment, the marketing of crops grown by its members.

Basis of Presentation: The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information required by GAAP for complete annual financial statement presentation.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations have been included in the accompanying unaudited condensed financial statements. Operating results for the interim periods ended December 29, 2007 are not necessarily indicative of the results to be expected for other interim periods or the full fiscal year. These financial statements should be read in conjunction with the consolidated financial statements and accompanying notes contained in the Pro-Fac Cooperative, Inc. Form 10-K for the fiscal year ended June 30, 2007.

New Accounting Pronouncements: In July 2006, the FASB released FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. The Cooperative adopted FIN 48 in the first quarter of fiscal 2008 with no material effect on the Cooperative’s financial statements.

Cash and Cash Equivalents:Cash and cash equivalents include short-term investments, including money market accounts and commercial paper, with original maturities of three months or less. The Cooperative maintains its cash and cash equivalents in accounts, which, at times, may exceed federally insured limits or may not be federally insured. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk with respect to cash and cash equivalents.

At December 29, 2007, cash and cash equivalents consisted of:

Cash	$	6,400
Money market accounts		3,251
Commercial paper		11,670
	$	21,321

Investments: The Cooperative invests in commercial paper and bonds that are bought and held principally for the purpose of selling them in the near future. These investments are classified as trading securities and are recorded at fair value on the balance sheet date in current assets. The change in fair value during the period is reported in the Cooperative’s condensed statement of income included in investment income.

Investments are summarized as follows at December 29, 2007:

			Unrealized		Fair
	Cost		Gain		Value
Commercial paper	$	9,328	$	16	$	9,344
Bonds		2,962		6		2,968
	$	12,290	$	22	$	12,312

Investment in Birds Eye Holdings, LLC: Until June 24, 2006, Pro-Fac accounted for its investment in Birds Eye Holdings LLC (“Holdings LLC”), a Delaware limited liability company and indirect parent company of Birds Eye Foods, Inc. (“Birds Eye Foods”) under the equity method of accounting.

Effective June 25, 2006, the Cooperative began using the cost method of accounting for its investment in Holdings LLC. As a result of beginning to use the cost method, the Cooperative’s proportionate share of the other comprehensive income and loss items of Holdings LLC previously recorded (net loss of approximately $5.6 million at June 24, 2006) was removed with a corresponding increase in the investment of approximately $5.6 million in accordance with Financial Accounting Standards Board Staff Position APB18-1 – “Accounting by an Investor for its Proportionate Share of Accumulated Other Comprehensive Income of an Investee Accounted for under the Equity Method in Accordance with APB Opinion No. 18 upon a Loss of Significant Influence.” The previously recorded proportional share of earnings and losses of Holdings LLC remained as a component of the carrying amount of the investment.

5

Under the cost method, the Cooperative’s share of earnings or losses is not included in the Cooperative’s balance sheet or statement of income and the Cooperative does not record its proportionate share of other comprehensive income and loss items of Holdings LLC. As a result of a $120.1 million distribution received from Holdings LLC during the first quarter of fiscal year 2008, Pro-Fac’s recorded investment in Holdings LLC was reduced to zero. However, Pro-Fac continues to own an approximate 40% interest in Holdings LLC through its ownership of Class B common units.

Investment in Farm Fresh First, LLC: Pro-Fac owns a 6.25% membership interest in Farm Fresh First, LLC (“Farm Fresh”) and has entered into an agricultural services agreement with Farm Fresh. Under the services agreement, Farm Fresh provides Pro-Fac with agricultural and administrative services and acts as Pro-Fac’s exclusive sales agent for the sale of agricultural products grown by Pro-Fac member-growers located in New York State, which are not subject to existing supply agreements. Certain members of Pro-Fac own the majority of the membership interests of Farm Fresh either directly or indirectly through entities owned or controlled by them, including three members of Pro-Fac’s Board of Directors who own their interests indirectly through affiliated entities and who serve as directors on the Farm Fresh board of directors. Pro-Fac accounts for this investment using the cost method. Accordingly, distributions of earnings are reported as income and distributions that represent a return of capital reduce the carrying value of the related investment. Pro-Fac received a $10,000 distribution from Farm Fresh during the quarter ended December 29, 2007, which was reported as income.

Gain from Transaction with Birds Eye Foods and Related Agreements: In connection with the acquisition by Vestar/Agrilink Holdings LLC, a Delaware limited liability company, and certain co-investors (collectively, “Vestar”) of Birds Eye Foods on August 19, 2002 (“the Transaction”), Pro-Fac and Birds Eye Foods entered into a termination agreement (the “Termination Agreement”), pursuant to which the 1994 marketing and facilitation agreement between Pro-Fac and Birds Eye Foods was terminated, and in consideration of such termination, Pro-Fac was entitled to the payment ofa termination fee of $10.0 million per year for five years with the last $2.0 million installment received in July 2007.

Payments under the Termination Agreement are considered additional consideration related to the Transaction. Accordingly, the portion of the payments received under the Termination Agreement related to Pro-Fac’s ownership percentage in Holdings LLC is recorded as a reduction to Pro-Fac’s investment in Holdings LLC. The remaining portion of payments received is recognized as additional gain on the Transaction with Birds Eye Foods in the period it is received. Accordingly, in the first six months of fiscal 2008 and the first six months of fiscal 2007, Pro-Fac recognized approximately $1.2 million and $3.6 million, respectively, as additional gain from the receipt of termination payments.

Distribution from Holdings LLC:During the first quarter of 2008, Pro-Fac received a distribution of approximately $120.1 million from Holdings LLC under the Limited Liability Agreement dated August 19, 2002 with Vestar (as amended from time to time, the “Limited Liability Agreement”). In accordance with the cost method of accounting for the investment in Holdings LLC, distributions of earnings are reported as income and distributions that represent a return of capital reduce the carrying value of the related investment. The portion of the distribution representing a return of capital exceeded the carrying value of the investment resulting in Pro-Fac reducing its investment in Holdings LLC by $3.5 million to zero with the remaining $116.6 million of the distribution recorded as income.

Income Taxes: The Cooperative qualifies for tax exempt status as a farmers’ cooperative under Section 521 of the Internal Revenue Code. Exempt cooperatives are permitted to reduce or eliminate taxable income through the use of special deductions such as dividends paid on its common and preferred stock and distributions of patronage income.

During the first quarter of fiscal year 2008, Pro-Fac received a $120.1 million distribution from Holdings LLC pursuant to the terms of the Limited Liability Company Agreement. At December 29, 2007, the Cooperative estimates that $10.1 million of the amount received will be a taxable dividend, subject to the qualified dividends received deduction, with the remaining amount representing a return of capital. The allocation of the distribution between taxable dividend and return of capital will not be finally determinable until at least June 2008 because the final allocation is dependent on the earnings and profits of Holdings LLC and its direct and indirect wholly-owned subsidiaries, including Birds Eye Foods, for the year ending June 2008.

Although the Cooperative has historically used its special deductions and distributions of patronage income to reduce the Cooperative's taxable income, no payments or allocations of patronage income were made for the fiscal year ended June 30, 2007. As a result, the Cooperative recorded a tax provision of $0.8 million for the six month period ended December 23, 2006. For fiscal year 2008, after deductions for dividends paid, the Cooperative expects to have a loss for tax purposes which will be carried back to recover taxes paid in prior periods. A tax benefit of $0.7 million has been recorded for the six month period ended December 29, 2007.

The Cooperative’s tax basis of its investment in Holdings LLC at June 30, 2007 was $186.4 million. At December 29, 2007, $110.0 million of the distribution from Holdings LLC is expected to be a return of capital, reducing this tax basis to $76.4 million. A deferred income tax asset has not been recognized on the estimated excess of the tax basis over the recorded financial statement value of Pro-Fac’s investment in Holdings LLC at December 29, 2007. This asset would only be realized upon the sale of Pro-Fac’s investment based on the proceeds received or receipt of a distribution representing a return of capital, neither of which was expected to occur in the foreseeable future.

6

NOTE 2.      AGREEMENTS WITH BIRDS EYE FOODS

In connection with the Transaction, Birds Eye Foods and Pro-Fac entered into several agreements, including the following:

Termination Agreement: Pro-Fac and Birds Eye Foods entered into the Termination Agreement, pursuant to which the 1994 marketing and facilitation agreement between Pro-Fac and Birds Eye Foods was terminated and, in consideration of such termination, Birds Eye Foods agreed to pay Pro-Fac a termination fee of $10.0 million per year for five years provided that certain ongoing conditions are met, including maintaining grower membership levels sufficient to generate certain minimum crop supply. The last $2.0 million installment was received on July 3, 2007.

Amended and Restated Marketing and Facilitation Agreement: Birds Eye Foods, a significant Pro-Fac customer, buys mainly fruits from Pro-Fac pursuant to the terms of the Amended and Restated Marketing and Facilitation Agreement dated August 19, 2002 between Pro-Fac and Birds Eye Foods. Birds Eye Foods pays Pro-Fac the commercial market value (“CMV”) of the crops supplied Birds Eye Foods in installments corresponding to the dates payment is made by Pro-Fac to its members for the delivered crops. Birds Eye Foods also provides Pro-Fac services under the Amended and Restated Marketing and Facilitation Agreement relating to planning, consulting, sourcing and harvesting crops from Pro-Fac members.

Limited Liability Company Agreement of Holdings LLC: Pro-Fac and Vestar are parties to a limited liability company agreement dated August 19, 2002 (as amended from time to time, the “Limited Liability Company Agreement”). While Birds Eye Foods is not a party to the Limited Liability Company Agreement, it contains terms and conditions relating to the management of Holdings LLC and its subsidiaries (including Birds Eye Foods), the distribution of profits and losses and the rights and limitations of members of Holdings LLC. The Limited Liability Company Agreement provides, among other things, that Holdings LLC’s distributable assets, which include cash receipts from operations, investing and financing, net of expenses, will be distributed to Holdings LLC’s members as determined by Holdings LLC’s management committee. Further, the Limited Liability Company Agreement provides that, subject to restrictions contained in any financing arrangements of Holdings LLC or its subsidiaries (including Birds Eye Foods), after August 19, 2007 and prior to a sale (or dissolution) of Holdings LLC, Holdings LLC will use commercially reasonable efforts to cause Birds Eye Foods to distribute annually to Holdings LLC up to $24.8 million of cash flow from the operations of Birds Eye Foods, which Holdings LLC would then distribute to the holders of its common units.

NOTE 3.      DEBT

Credit Agreement: Birds Eye Foods and Pro-Fac entered into a credit agreement, dated August 19, 2002, which was amended on March 28, 2007 (the “Credit Agreement”), pursuant to which Birds Eye Foods agreed to make available to Pro-Fac loans in an aggregate principal amount of up to $5.0 million. The maximum amount was reduced by $1.0 million per year, if not borrowed. At June 30, 2007, Pro-Fac owed $1.1 million, including accrued interest, under the Credit Agreement with Birds Eye Foods. Pro-Fac repaid this amount during the quarter ended September 29, 2007. The Credit Agreement expired on November 20, 2007. No further amounts are owed to Birds Eye Foods or can be borrowed under the Credit Agreement.

Line of Credit: The Cooperative may borrow up to $2.0 million from M&T Bank under the terms of the M&T Line of Credit. As of December 29, 2007, no amount was outstanding under the M&T Line of Credit. Principal amounts borrowed bear interest at 75 basis points above the prime rate (prime rate was 7.25% at December 29, 2007) in effect on the day proceeds are disbursed, as announced by M&T Bank, as its prime rate of interest. Interest is payable monthly. Amounts extended under the M&T Line of Credit are required to be repaid in full during each year by July 15, with further borrowings prohibited for a minimum of 60 consecutive days after such repayment. The Cooperative's obligations under the M&T Line of Credit are secured by a security interest granted to M&T Bank in substantially all of the assets of the Cooperative, excluding its Class B common units owned in Holdings LLC. The collateral does include any distributions made in respect of the Class B common units and cash payments made by Birds Eye Foods to the Cooperative.

7

NOTE 4.      COMMON STOCK AND CAPITALIZATION

The following table illustrates the Cooperative’s shares authorized, issued, and outstanding at December 29, 2007.

	Par		Shares	Shares Issued
	Value		Authorized	And Outstanding
Common Stock	$	5.00	5,000,000	1,769,540
Non-Cumulative Preferred Stock	$	25.00	5,000,000	0
Class A Cumulative Preferred Stock	$	1.00	10,000,000	1,773,839
Class B Cumulative Preferred Stock	$	1.00	9,500,000	0
Class C Cumulative Preferred Stock	$	1.00	10,000,000	0
Class D Cumulative Preferred Stock	$	1.00	10,000,000	0
Class E Cumulative Preferred Stock	$	1.00	10,000,000	0
Class B, Series I 10% Cumulative Redeemable
Preferred Stock	$	1.00	500,000	0

In the event of liquidation, the relative preference of Pro-Fac’s outstanding securities is as follows: first retains, then cumulated dividends on the Cooperative’s Class A cumulative preferred stock, then all classes of preferred stock, pari passu, then common stock and, finally, special membership interests.

During the quarter ended December 29, 2007, the Cooperative redeemed all non-cumulative preferred shares at a cost of approximately $658,000 and 3,155,433 Class A cumulative preferred shares at a cost of approximately $78,886,000.

While the Cooperative presently has no plans to liquidate, if liquidation were to occur, the order of redemption and the amount required to fully redeem each class outstanding, at December 29, 2007, is as follows:

	Amount Required
(Dollars in Thousands)	to Fully Redeem
Class A Cumulative Preferred Stock	$	44,346
Common Stock		8,848
Special Membership Interests		21,733
	$	74,927

Retained Earnings Allocated to Members (“Retains”): Retains arise from patronage income and are allocated to the accounts of members within 8 1/2 months of the end of each fiscal year. For the six month periods ended December 29, 2007 and December 23, 2006, no patronage income was retained. Qualified retains are taxable income to the member in the year the allocation is made.

During the first quarter of fiscal year 2008, the Cooperative redeemed all outstanding retains for approximately $6.8 million using proceeds of the $120.1 distribution received in July 2007 from Holdings LLC.

Preferred Stock: All preferred stock outstanding originated, directly or indirectly, from the conversion at par value of retains at the discretion of Pro-Fac’s Board of Directors. Preferred stock is generally non-voting, except that the holders of preferred stock are entitled to vote on those matters specifically required by law.

Pro-Fac’s Class A cumulative preferred stock is listed under the symbol PFACP on the Nasdaq Capital Market and has a dividend rate of $1.72 per share annually, payable in four quarterly installments of $.43 per share; cumulative, if not paid.

During the first six months of fiscal year 2008, Pro-Fac paid cash dividends totaling $7.5 million on the non-cumulative and Class A cumulative preferred stock representing $3.3 million of cumulated dividends and $4.2 million of dividends for the six months ended December 29, 2007. On January 31, 2008, the Cooperative paid a cash dividend of $0.43 per share on the Class A cumulative preferred stock totaling approximately $0.8 million.

8

The Cooperative’s ability to pay dividends is dependent upon available cash, capital surplus and its future earnings. The Cooperative’s principal use of available cash has been the payment of dividends on its Class A cumulative preferred stock and its non-cumulative preferred stock. Historically, the $10.0 million annual receipts under the Termination Agreement have been the principal source of cash for payment of dividends with the last installment under the Termination Agreement received in July 2007. Pro-Fac is a party to the Limited Liability Company Agreement that contains terms and conditions relating to the distribution of profits and losses, and the rights and limitations of members of Holdings LLC. Pro-Fac owns Class B common units in and is a member of Holdings LLC. The Limited Liability Company Agreement of Holdings LLC provides that, subject to restrictions contained in any financing arrangements of Holdings LLC or its subsidiaries (including Birds Eye Foods), after August 19, 2007 and prior to a sale (or dissolution) of Holdings LLC, Holdings LLC will use commercially reasonable efforts to cause Birds Eye Foods to make annual distributions to Holdings LLC, which can in turn be used by Holdings LLC to fund distributions to its common unit holders, including Pro-Fac.

Holdings LLC has advised Pro-Fac that it will not speculate as to whether distributions will be made under the Limited Liability Company Agreement. As a minority owner of Holdings LLC, Pro-Fac has no control over the determination of whether such distributions will be made. Accordingly, in the fourth quarter of fiscal year 2006, Pro-Fac’s Board of Directors developed a business plan that assumed distributions would not be made under the Limited Liability Company Agreement to replace the $10.0 million annual source of cash under the Termination Agreement that ended with the last payment in July 2007.

In July 2007, Pro-Fac received a distribution of approximately $120.1 million from Holdings LLC under the Limited Liability Company Agreement. During the first quarter of fiscal year 2008, Pro-Fac used this distribution: to redeem all retained earnings allocated to its members at a cost of approximately $6.8 million; to pay dividends on its non-cumulative preferred stock and its Class A cumulative preferred stock at a cost of approximately $5.4 million; and to repay principal and interest owed under its Credit Agreement with Birds Eye Foods in an amount equal to approximately $1.1 million. During the second quarter of fiscal year 2008, Pro-Fac used this distribution to: redeem all of Pro-Fac’s non-cumulative preferred stock at a price of $25.00 per share for an aggregate redemption cost of approximately $0.7 million; to redeem 3,155,433 shares of its Class A cumulative preferred stock at a price of $25.00 per share for an aggregate redemption cost of approximately $78.9 million including transaction costs related to the Class A cumulative preferred stock; to pay dividends on its preferred stock to the date of redemption as required to affect the redemption at a cost of approximately $2.1 million; and to establish the reserve discussed below.

Pro-Fac set aside from the distribution cash of approximately $24.0 million as a reserve for taxes that it may incur as a result of the $120.1 million distribution. A definite determination of the taxability of the distribution may not be possible until at least June 2008. Transactions affecting Holdings LLC, which Pro-Fac has no control over, will determine to what extent the amount received will be taxable to the Cooperative.

The Board of Directors periodically re-evaluates its business plan, which currently includes the suspension of dividends on the Cooperative’s preferred stock. Accordingly, there can be no assurances that Pro-Fac will pay dividends after January 31, 2008. The declaration of any future dividends is subject to Board action in advance of any such declaration based upon all of the facts and circumstances at such time.

Depending upon a variety of factors, the Board currently believes that Pro-Fac has sufficient sources of cash to fund its operations at least through the end of fiscal 2010, which the Board believes will provide time to monitor Pro-Fac’s investment in Holdings LLC and explore other sources of cash.

Common Stock: The Cooperative’s common stock is owned by its members. The number of shares of common stock owned by a Pro-Fac member-grower is based upon the quantity and type of crops to be marketed through Pro-Fac by the member-grower. If a member-grower ceases to be a producer of agricultural products that are marketed through the Cooperative, then the member-grower must sell its shares of Pro-Fac common stock to another grower that is acceptable to the Cooperative. Additionally, member-growers desiring to adjust quantities of crops marketed through Pro-Fac may either offer to sell or purchase shares of Pro-Fac common stock.

If the selling member-grower is unable to find a qualified grower to purchase its shares of Pro-Fac common stock, the member-grower must, upon notification from the Cooperative, sell its shares of common stock to the Cooperative for cash at par value, plus any dividends thereon which have been declared but remain unpaid.

In January 2003 the Pro-Fac Board of Directors suspended the payment of dividends on the Cooperative’s common stock for an indefinite period of time. In January 2006 the Board placed a moratorium on Pro-Fac’s repurchase of shares of its common stock from its member-growers, excluding approximately 9,000 shares which were repurchased under prior policies. Any repurchases by Pro-Fac of its common stock is subject to pre-approval by the Board.

Special Membership Interests: In conjunction with the Transaction, special membership interests were allocated to the then current and former members of Pro-Fac who had made patronage deliveries to or on behalf of Pro-Fac in the six fiscal years ended June 29, 2002, in proportion to the patronage deliveries made by those members during that six fiscal year period.

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Accumulated Deficit: Accumulated deficit consists of accumulated income and losses after distribution of earnings allocated to members and dividends.

NOTE 5.      OTHER MATTERS

Legal Matters: The Cooperative is party to various legal proceedings from time to time in the normal course of its business. In the opinion of management, any liability that might be incurred upon the resolution of these proceedings will not, in the aggregate, have a material adverse effect on the Cooperative's business, financial condition, or results of operations. Further, no such proceedings are known to be contemplated by any governmental authorities. The Cooperative maintains general liability insurance coverage in amounts deemed to be adequate by its Board of Directors.

Indemnifications:From time to time, in the ordinary course of its business, Pro-Fac has, or may, enter into agreements with its customers, suppliers, service providers and business partners which contain indemnification provisions. Generally, such indemnification provisions require the Cooperative to indemnify and hold harmless the indemnified party(ies) and to reimburse the indemnified party(ies) for claims, actions, liabilities, losses and expenses in connection with any personal injuries or property damage resulting from any Pro-Fac products sold or services provided. Additionally, the Cooperative may from time to time agree to indemnify and hold harmless its providers of services from claims, actions, liabilities, losses and expenses relating to their services to Pro-Fac, except to the extent finally determined to have resulted from the fault of the provider of services relating to such services. The level of conduct constituting fault of the service provider will vary from agreement to agreement and may include conduct which is defined in terms of negligence, gross negligence, willful misconduct, omissions or other culpable behavior. The term of these indemnification provisions are generally not limited. The maximum potential future payments that the Cooperative could be required to make under these indemnification provisions are unlimited and are not determinable at this time, as any future payments would be dependent on the type and extent of the related claims, and all relevant defenses to the claims, which are not estimable. Historically, costs incurred to resolve claims related to these indemnification provisions have not been material to the Cooperative’s financial position, results of operations or cash flows.

The Cooperative has by-laws, policies, and agreements under which it indemnifies its directors and officers from liability for certain events or occurrences while the directors or officers are, or were, serving at Pro-Fac's request in such capacities. Pro-Fac indemnifies its officers and directors to the fullest extent allowed by law. The maximum potential amount of future payments that the Cooperative could be required to make under these indemnification provisions is unlimited, but would be affected by all relevant defenses to the claims.

As part of the Transaction, Pro-Fac agreed to indemnify Birds Eye Foods for certain environmental liabilities. This obligation, however, is only triggered once the aggregate of all liabilities subject to indemnification under the Unit Purchase Agreement (including those unrelated to environmental matters) exceeds $10 million.

As of the date of this Report, Pro-Fac does not expect to be required to perform under the indemnifications described above.

Related Party Transactions: Substantially all purchases are from member-growers of the Cooperative. For fiscal year 2007, approximately 81 percent of all crops purchased by Pro-Fac from its members were sold to Birds Eye Foods, an indirect subsidiary of Holdings LLC.

Pro-Fac is a party to an agricultural services agreement with Farm Fresh, a limited liability company, in which Pro-Fac owns a 6.25% membership interest. Under the services agreement, Farm Fresh provides Pro-Fac with agricultural and administrative services and acts as Pro-Fac’s exclusive sales agent for the sale of agricultural products grown by Pro-Fac member-growers located in New York State, which are not subject to existing supply agreements. Certain members of Pro-Fac own the majority of the membership interests of Farm Fresh either directly or indirectly through entities owned or controlled by them. Included are three members of Pro-Fac’s Board of Directors, Peter Call, chairman of Pro-Fac’s Board, Kenneth Mattingly and James Vincent, who are each indirect owners of 6.25% of the membership interest of Farm Fresh (total 18.75%) through affiliated entities. Messrs. Call, Mattingly and Vincent serve on the board of directors of Farm Fresh, and Mr. Call serves as chairman.

During the six months ended December 29, 2007, Pro-Fac paid Farm Fresh approximately $106,000 for services provided. Farm Fresh paid Pro-Fac $15,000 for consulting services provided by Pro-Fac during the same period. At December 29, 2007, Pro-Fac owed Farm Fresh approximately $46,000.

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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS AND RISK FACTORS

From time to time, Pro-Fac or persons acting on behalf of Pro-Fac may make oral and written statements that may constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) or by the Securities and Exchange Commission (“SEC”) in its rules, regulations, and releases. The Cooperative desires to take advantage of the “safe harbor” provisions in the PSLRA for forward-looking statements made from time to time, including, but not limited to, the forward-looking information contained in the “Management’s Discussion and Analysis of Financial Condition or Plan of Operation” section of this Report and other statements made in this Report and in other filings with the SEC.

The Cooperative cautions readers that any such forward-looking statements made by or on behalf of the Cooperative are based on management’s current expectations and beliefs, all of which could be affected by the uncertainties and risk factors described below. The Cooperative’s actual results could differ materially from those expressed or implied in the forward-looking statements. The risk factors that could impact the Cooperative include:

• The Cooperative’s most significant asset is its investment in Holdings LLC. Holdings LLC is not a reporting company under the Securities Exchange Act of 1934 (the “1934 Act”) and, accordingly, does not file annual reports on Form 10-K, quarterly reports on Form 10-Q or other periodic reports with the SEC. Accordingly, the holders of shares of Pro-Fac capital stock do not have access to information about Holdings LLC or its indirect, wholly-owned subsidiary, Birds Eye Foods, their financial condition and results of operations.

• The Cooperative’s ability to pay dividends is dependent upon available cash, capital surplus and its future earnings. The Cooperative’s principal use of available cash has been the payment of dividends on its Class A cumulative preferred stock and its non-cumulative preferred stock. Historically, the $10.0 million annual receipts under the Termination Agreement have been the principal source of cash for payment of dividends with the last $2.0 million installment received in July 2007. Although Pro-Fac is a party to the Limited Liability Company Agreement and, as a member of Holdings LLC, is entitled to annual distributions, if made, Holdings LLC has advised Pro-Fac that it will not speculate as to whether distributions will be made under the Limited Liability Company Agreement. As a minority owner of Holdings LLC, Pro-Fac has no control over the determination of whether such distributions will be made. Accordingly, Pro-Fac’s Board of Directors developed a business plan that assumed distributions would not be made under the Limited Liability Company Agreement to replace the $10.0 million annual source of cash under the Termination Agreement that ended with the last payment in July 2007. That business plan, which the Board of Directors periodically evaluates, included the suspension of dividend payments on the Cooperative’s preferred stock beginning with the quarter ended June 30, 2007.
  
  Using proceeds of the distribution from Holdings LLC, the Board of Directors declared and the Cooperative paid dividends on its preferred stock in July and October 2007 and January 2008, however, there can be no assurances that Pro-Fac will pay dividends after the payment on January 31, 2008. The declaration of any future dividends is subject to Board action in advance of any such declaration based upon all of the facts and circumstances at such time.

ITEM 2.      MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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

The purpose of this discussion is to outline the reasons for material changes in Pro-Fac’s financial condition and results of operations in the second quarter and first six months of fiscal 2008 as compared to the second quarter and first six months of fiscal 2007. This section should be read in conjunction with Part I, Item 1. Financial Statements, of this Report.

OVERVIEW

Since 1960, Pro-Fac has operated as an agricultural cooperative, owned and controlled by its members, to purchase, market, and sell crops grown by its member-growers, for the mutual benefit of its members. The Cooperative’s core business focus has not changed in 47 years and its current strategy is to continue its business of purchasing, marketing, and selling its member-grower crops to its customers.

One of the challenges Pro-Fac faces, which is discussed below under “Liquidity and Capital Resources”, is the Cooperative’s source of available cash to fund its operations and pay its dividends. Historically, Pro-Fac’s primary source of cash to fund its operations and pay dividends was the $10.0 million in payments it received annually under the Termination Agreement, the last installment of $2.0 million was received in July 2007. Currently, Pro-Fac’s primary sources of cash are cash on hand, gross profit and margin on certain sales, interest income and annual distributions, if any, made by Holdings LLC to Pro-Fac under the Limited Liability Company Agreement.

Late in fiscal year 2006, the Pro-Fac Board announced that it expected to suspend the declaration and payment of dividends on Pro-Fac’s Class A cumulative preferred stock beginning with the quarter ended June 2007. This decision was based, in part, on Pro-Fac’s minority ownership status in Holdings LLC, and Holdings LLC’s advice that it would not speculate as to whether distributions would be made under the Limited Liability Company Agreement. Accordingly, Pro-Fac has been operating under a business plan that, as described above, assumes no distributions will be made under the Limited Liability Agreement.

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In July 2007, Pro-Fac received a distribution of approximately $120.1 million from Holdings LLC. Pro-Fac invested the $120.1 million distribution in high quality, low risk investments pending use of the funds. Pro-Fac expects to earn investment income of approximately $2.5 million in fiscal year 2008 as a result of these investments. During the first quarter of fiscal year 2008, Pro-Fac used this distribution: to redeem all retained earnings allocated to its members at a cost of approximately $6.8 million; to pay dividends on its non-cumulative preferred stock and its Class A cumulative preferred stock at a cost of approximately $5.4 million; and to repay principal and interest owed under its Credit Agreement with Birds Eye Foods in an amount equal to approximately $1.1 million. During the second quarter of fiscal year 2008, Pro-Fac used this distribution to: redeem all of Pro-Fac’s non-cumulative preferred stock at a price of $25.00 per share for an aggregate redemption cost of approximately $0.7 million; to redeem 3,155,433 shares of its Class A cumulative preferred stock at a price of $25.00 per share for an aggregate redemption cost of approximately $78.9 million related to the Class A cumulative preferred stock; and to pay dividends on its preferred stock to the date of redemption as required to affect the redemption at a cost of approximately $2.1 million. Pro-Fac has also set-aside approximately $24.0 million in cash as a reserve for taxes that it may incur as a result of the distribution. Although the Cooperative currently expects that the majority of the distribution will be a non-taxable return of capital, a definite determination of the taxability of the distribution may not be possible until at least June 2008 because transactions affecting Holdings LLC will determine how the distribution will ultimately be taxed.

Pro-Fac’s current business plan continues to provide for the suspension of dividends on the Cooperative’s preferred stock, although the Board of Directors periodically evaluates its business plan in consideration of past and future events. Depending upon a variety of factors, the Board currently believes that Pro-Fac has sufficient sources of cash to fund its operations at least through the end of fiscal 2010, which the Board believes will provide time to monitor Pro-Fac’s investment in Holdings LLC and explore other sources of cash.

RESULTS OF OPERATIONS - SECOND QUARTER 2008 COMPARED TO SECOND QUARTER 2007

Net sales, cost of sales and gross profit:Net sales and cost of sales decreased in the quarter ended December 29, 2007, as the Cooperative entered into fewer sales transactions as a principal for its members than in the quarter ended December 23, 2006. This decrease is due to timing of sales transactions.

Gain from transaction with Birds Eye Foods and related agreements: In accordance with the Termination Agreement, Pro-Fac was entitled to the payment of a termination fee of $10.0 million per year for five years payable in quarterly installments as follows: $4.0 million on each July 1, and $2.0 million each October 1, January 1, and April 1 with the final payment received in July 2007.

Payments under the Termination Agreement are considered additional consideration related to the Transaction. Accordingly, the portion of the payments received under the Termination Agreement related to Pro-Fac’s continuing ownership percentage are recorded as a reduction to Pro-Fac’s investment in Holdings LLC. The remaining portion of payments received is recognized as additional gain on the Transaction with Birds Eye Foods in the period it is received. The last $2.0 installment was received in July 2007, accordingly, no additional gain was recognized in the second quarter of fiscal year 2008. Pro-Fac recognized approximately $1.2 million as additional gain (approximately 60 percent) from the receipt of termination payments in the second quarter of fiscal year 2007.

Margin on delivered product: The Cooperative negotiates certain sales transactions on behalf of its members, which result in margin being earned by the Cooperative. The Cooperative earned $105,000 in margin during the second quarter of fiscal 2008 and $54,000 in margin during the second quarter of fiscal 2007.

Selling, administrative, and general expense: Selling, administrative, and general expenses totaled $0.4 million and $0.3 million for the quarters ended December 29, 2007 and December 23, 2006, respectively. The increase is due primarily to services purchased from Farm Fresh and professional services.

Investment income: Investment income increased from $61,000 for the quarter ended December 23, 2006, to $0.7 million for the quarter ended December 29, 2007, due to cash equivalents and investments resulting from receipt of a $120.1 million distribution from Holdings LLC in July 2007. Investment income for the quarter ended December 29, 2007, included unrealized gains of approximately $22,000.

Income taxes: The Cooperative qualifies for tax exempt status as a farmers’ cooperative under Section 521 of the Internal Revenue Code. Exempt cooperatives are permitted to reduce or eliminate taxable income through the use of special deductions such as dividends paid on its common and preferred stock and distributions of patronage income.

The Cooperative has historically used these special deductions and distributions of patronage income to reduce the Cooperative's taxable income. The Pro-Fac Board of Directors determined that there would be no payment or allocation of patronage income for the fiscal year ended June 30, 2007. As a result, the Cooperative recorded a tax provision of $0.3 million for the three month period ended December 23, 2006. For fiscal year 2008, after deductions for dividends paid, the Cooperative expects to have a loss for tax purposes which will be carried back to recover taxes paid in prior periods. Accordingly, a tax benefit of $0.6 million has been recorded for the three month period ended December 29, 2007.

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RESULTS OF OPERATIONS – FIRST SIX MONTHS 2008 COMPARED TO FIRST SIX MONTHS 2007

Net sales, cost of sales and gross profit: Net sales and cost of sales decreased in the six months ended December 29, 2007, as the Cooperative entered into fewer sales transactions as a principal for its members than in the six months ended December 23, 2006. This decrease is due to timing of sales transactions.

Gain from transaction with Birds Eye Foods and related agreements: In the first six months of fiscal year 2008 and the first six months of fiscal year 2007, Pro-Fac recognized approximately $1.2 million and $3.6 million, respectively, as additional gain (approximately 60 percent) from the receipt of termination payments under the Termination Agreement.

Margin on delivered product: The Cooperative negotiates certain sales transactions on behalf of its members, which result in margin being earned by the Cooperative. The Cooperative earned $129,000 in margin during the first six months of fiscal 2008 and $112,000 in margin during the first six months of fiscal 2007.

Selling, administrative, and general expense: Selling, administrative, and general expenses totaled $0.9 million and $0.7 million for the six months ended December 29, 2007 and December 23, 2006, respectively. The $0.2 million increase is due primarily to services purchased from Farm Fresh and professional services.

Investment income: Investment income increased from $118,000 for the six months ended December 23, 2006, to $2.1 million for the six months ended December 29, 2007, due to higher on-hand cash, cash equivalents and investments resulting from receipt of a $120.1 million distribution from Holdings LLC in July 2007. Investment income for the six months ended December 29, 2007, included unrealized gains of approximately $22,000.

Distribution from Holdings LLC: During the first quarter of 2008, Pro-Fac received a distribution of approximately $120.1 million from Holdings LLC under the Limited Liability Agreement. In accordance with the cost method of accounting for the investment in Holdings LLC, Pro-Fac reduced its investment in Holdings LLC by $3.5 million to zero with the remaining $116.6 million of the distribution recorded as income.

Income taxes: The Cooperative recorded a tax provision of $0.8 million for the six month period ended December 23, 2006. For fiscal year 2008, after deductions for dividends paid, the Cooperative expects to have a loss for tax purposes which will be carried back to recover taxes paid in prior periods. Accordingly, a tax benefit of $0.7 million has been recorded for the six month period ended December 29, 2007.

CRITICAL ACCOUNTING POLICIES

“NOTE 1. Description of Business and Summary of Accounting Policies” under “Notes to Condensed Financial Statements” included in Part I, Item 1 of this Report discusses the significant accounting policies of Pro-Fac. Pro-Fac’s discussion and analysis of its financial condition and results of operations are based upon its condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires Pro-Fac’s management to make estimates, judgments and assumptions that affect the reported amount of assets, liabilities, revenues and expenses. On an ongoing basis, Pro-Fac evaluates its estimates.

Certain accounting policies deemed critical to Pro-Fac’s results of operations or financial position are discussed below.

The Cooperative accounts for its investment in Holdings LLC under the cost method of accounting. Under the cost method, the Cooperative’s share of earnings or losses is not included in the Cooperative’s balance sheet or statement of operations and the Cooperative does not record its proportionate share of other comprehensive income and loss items of Holdings LLC. As a result of the $120.1 million distribution received from Holdings LLC during the first quarter of fiscal year 2008, Pro-Fac’s investment in Holdings LLC was reduced to zero. However, Pro-Fac continues to own an approximate 40% interest in Holdings LLC through its ownership of Class B common units.

At December 29, 2007, the Cooperative estimates that $10.1 million of the distribution received will be a taxable dividend, subject to the qualified dividends received deduction, with the remaining amount representing a return of capital. The allocation of the distribution between taxable dividend and return of capital will not be finally determinable until at least June 2008 because the final allocation is dependent on the earnings and profits of Holdings LLC and its direct and indirect wholly-owned subsidiaries, including Birds Eye Foods, for the year ending June 2008. A deferred income tax asset has not been recognized on the estimated excess of the tax basis over the recorded financial statement value of the investment in Holdings LLC at December 29, 2007, of approximately $76.4 million. This asset would only be realized upon the sale of the investment based on the proceeds received or receipt of a distribution representing a return of capital, which was not considered probable at December 29, 2007.

Pro-Fac markets and sells its members’ crops to food processors. Under the provisions of Emerging Issues Task Force Issue No. 99-19, “Reporting Revenue Gross Versus Net as an Agent”, the Cooperative records activity among its customers, itself and its members on a net basis. For transactions in which Pro-Fac acts a principal rather than an agent, sales and cost of sales are reported.

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LIQUIDITY AND CAPITAL RESOURCES

Historically, Pro-Fac has had four sources or potential sources of available cash to fund its operating expenses and the payment of its quarterly dividends: (i) cash from its sale of raw products to its customers, (ii) payments received under the Termination Agreement with Birds Eye Foods, (iii) cash distributions related to its investment in Holdings LLC, and (iv) borrowings.

Pro-Fac receives cash payments equal to the CMV of crops sold to Birds Eye Foods, Allens, Inc. and other customers pursuant to the Amended and Restated Marketing and Facilitation Agreement, the Allens supply agreement and other supply agreements. Although CMV payments are considered a potential source of cash to Pro-Fac, with the exception of the Board’s decision to deduct 1 percent of CMV otherwise payable to its member-growers for crops delivered in fiscal years 2003 and 2004, Pro-Fac has typically paid 100 percent of CMV to its member-growers for crops delivered and did so in fiscal years 2007 and 2006. Since CMV payments are approximately equal to the cash Pro-Fac receives from its customers for its raw products, CMV payments are not a significant source of available cash from which Pro-Fac can pay operating expenses and quarterly dividends.

While Pro-Fac principally acts as agent for its member-growers in the marketing and sale of crops, Pro-Fac does occasionally engage in crop sales transactions as a principal, resulting in gross profit or margin being earned by the Cooperative. Although the amounts earned have been increasing through fiscal year 2007, future increases are not expected to be significant.

Net cash available to Pro-Fac, after payment of CMV to Pro-Fac’s member-growers, has historically been used to pay Pro-Fac’s operating expenses as well as its quarterly dividends on its preferred stock and to fund repurchases of its common stock.

The final installment payment of $2.0 million to Pro-Fac under the Termination Agreement was received in July 2007.

The Limited Liability Company Agreement provides that, subject to restrictions contained in any financing arrangements of Holdings LLC or its subsidiaries (including Birds Eye Foods), Holdings LLC will use commercially reasonable efforts to cause Birds Eye Foods to distribute annually to Holdings LLC up to $24.8 million of cash flow from operations of Birds Eye Foods, which Holdings LLC will then distribute to the holders of its common units, including Pro-Fac. Holdings LLC has advised Pro-Fac that it will not speculate as to whether distributions will be made under the Limited Liability Company Agreement and, as a minority owner of Holdings LLC, Pro-Fac has no control over the determination of whether such distributions will be made. Accordingly, Pro-Fac’s Board of Directors developed, and Pro-Fac has been operating under, a business plan that assumes no distributions will be made under the Limited Liability Agreement.

In July 2007, Pro-Fac received a distribution of approximately $120.1 million from Holdings LLC under the Limited Liability Company Agreement. During the first quarter of fiscal year 2008, Pro-Fac used this distribution: to redeem all retained earnings allocated to its members at a cost of approximately $6.8 million; to pay dividends on its non-cumulative preferred stock and its Class A cumulative preferred stock at a cost of approximately $5.4 million; and to repay principal and interest owed under its Credit Agreement with Birds Eye Foods in an amount equal to approximately $1.1 million. During the second quarter of fiscal year 2008, Pro-Fac used this distribution to: redeem all of Pro-Fac’s non-cumulative preferred stock at a price of $25.00 per share for an aggregate redemption cost of approximately $0.7 million; to redeem 3,155,433 shares of its Class A cumulative preferred stock at a price of $25.00 per share for an aggregate redemption cost of approximately $78.9 million including transaction costs related to the Class A cumulative preferred stock; to pay dividends on its preferred stock to the date of redemption as required to affect the redemption at a cost of approximately $2.1 million; and to establish the reserve discussed below.

Pro-Fac has set aside cash totaling approximately $24.0 million as a reserve for taxes that it may incur as a result of the $120.1 million distribution. A definite determination of the taxability of the distribution may not be possible until at least June 2008. Transactions affecting Holdings LLC, which Pro-Fac has no control or influence over, will determine to what extent the amount received will be taxable to the Cooperative.

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The Board of Directors periodically re-evaluates its business plan, which currently includes the suspension of dividends on the Cooperative’s preferred stock. Accordingly, there can be no assurances that Pro-Fac will pay dividends after January 31, 2008. The declaration of any future dividends is subject to Board action in advance of any such declaration based upon all of the facts and circumstances at such time.

Pro-Fac invested the proceeds of the $120.1 million distribution in high quality, low risk investments pending use of the funds. Pro-Fac expects to earn investment income of approximately $2.5 million in fiscal year 2008 as a result of the investment of these funds.

A discussion of "Statement of Cash Flows" for the six months ended December 29, 2007, follows:

Net cash provided by operating activities was $106.1 million for the first six months of fiscal 2008 compared to cash used in operating activities of approximately $0.3 million in the first six months of fiscal 2007. The change primarily represents income from the receipt of the $120.1 million distribution from Holdings LLC, net of the investment of a portion of the funds (approximately $12.3 million) from the distribution into trading securities in the six months of fiscal year 2008, and changes in the timing of cash receipts from customers other than Birds Eye Foods and related cash payments to member-growers between the first six months of fiscal year 2008 and the first six months of fiscal year 2007.

Cash provided by investing activities for the first six months of fiscal 2008 was $5.5 million related to the receipt of $2.0 million from Birds Eye Foods as the final payment under the Termination Agreement and the portion of the distribution from Holdings LLC classified as a return of capital, approximately $3.5 million. In the first six months of fiscal 2007, $6.0 million was received from Birds Eye Foods under the Termination Agreement.

Net cash used in financing activities during the first six months of fiscal 2008 included $1.0 million to repay amounts previously borrowed, $6.8 million to redeem all retained earnings allocated to members, $79.5 million to redeem all non-cumulative preferred shares and 3,155,433 Class A cumulative preferred shares and $7.5 million in dividends paid. During the first six months of fiscal 2007, the Cooperative borrowed $1.0 million and paid dividends of $3.2 million.

In January 2003, the Pro-Fac Board of Directors suspended the payment of dividends on the Cooperative’s common stock for an indefinite period of time and in January 2006 the Board placed a moratorium on Pro-Fac’s repurchase of shares of its common stock from its member-growers, excluding approximately 9,000 shares which were repurchased under prior policies. Any repurchases by Pro-Fac of its common stock are subject to pre-approval by the Board.

Depending on a variety of factors, the Board currently believes that Pro-Fac has sufficient sources of cash to fund its operations at least through the end of fiscal 2010, which the Board believes will provide time to monitor Pro-Fac’s investment in Holdings LLC and explore other sources of cash.

ITEM 3.      CONTROLS AND PROCEDURES

Disclosure Controls and Procedures: Pro-Fac’s Principal Executive Officer and Principal Financial Officer evaluated the effectiveness of the design and operation of Pro-Fac’s disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, Pro-Fac’s Principal Executive and Principal Financial Officer concluded that Pro-Fac’s disclosure controls and procedures as of December 29, 2007 (the end of the period covered by this Report), have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by Pro-Fac in reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There were no changes in Pro-Fac’s internal control over financial reporting identified during the quarter ended December 29, 2007, that materially affected, or are reasonably likely to materially affect, Pro-Fac’s internal control over financial reporting.

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PART II

ITEM 1.      LEGAL PROCEEDINGS

The information called for by this Item is disclosed in NOTE 5. "Other Matters – Legal Matters" under "Notes to Condensed Financial Statements" in Part I, Item 1 of this Form 10-QSB, and is incorporated herein by reference in answer to this Item.

ITEM 2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers

	(a)	(b)	(c)	(d)
			Total Number	Maximum Number
			Of Shares Purchased	Of Shares that
	Total Number	Average	As Part of Public	May yet be
	Of Shares	Price Paid	Announced	Purchased Under
	Purchased	Per Share	Plans or Programs	The Plans or Programs
October 1, 2007 to
October 31, 2007	3,155,433(1)	$25.00	3,155,433	0

(1) Shares of Class A cumulative preferred stock redeemed on October 31, 2007, pursuant to a Notice of Partial Redemption dated September 4, 2007, by which Pro-Fac called for redemption, in accordance with its Certificate of Incorporation, of up to 64% of Pro-Fac’s outstanding Class A cumulative preferred stock, not to exceed 3,200,000 in total shares (or $80 million in aggregate redemption price) to be redeemed, at a redemption price of $25.00 per share, without interest. The redemption date was October 31, 2007.

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.      OTHER INFORMATION

None

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ITEM 6.      EXHIBITS

Exhibits
Exhibit Number	Description
31	Certification required by Rule 13a-14 (a) of the Securities Exchange Act of 1934 of the Principal Executive Officer and the Principal Financial Officer (filed herewith).
32	Certification required by Rule 13a-14 (b) of the Securities Exchange Act of 1934 and pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, of the Principal Executive Officer and the Principal Financial Officer (filed herewith).

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

				PRO-FAC COOPERATIVE, INC.
Date:	February 11, 2008	BY:	/s/	Stephen R. Wright
				General Manager, Chief Executive
				Officer, Chief Financial Officer
				and Secretary
				(On Behalf of the Registrant and as
				Principal Executive Officer
				Principal Financial Officer, and
				Principal Accounting Officer)

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EX-31

Exhibit 31

C E R T I F I C A T I O N

	I, Stephen R. Wright, certify that:
1.	I have reviewed this quarterly report on Form 10-QSB of Pro-Fac Cooperative, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.	The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c)	Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and
5.	The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Dated:	February 11, 2008	/s/ Stephen R. Wright
		General Manager, Chief Executive Officer,
		Chief Financial Officer and Secretary
		(Principal Executive Officer and
		Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION REQUIRED BY RULE 13a-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934 AND PURSUANT
TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

          In connection with the filing of the quarterly report on Form 10-QSB of Pro-Fac Cooperative, Inc. for the fiscal quarter ended December 29, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Stephen R. Wright, General Manager, Chief Executive Officer, Chief Financial Officer and Secretary of Pro-Fac Cooperative, Inc., hereby certifies, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

          (1) The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Pro-Fac Cooperative, Inc.

Dated:	February 11, 2008	/s/ Stephen R. Wright
		General Manager, Chief Executive Officer,
		Chief Financial Officer and Secretary
		(Principal Executive Officer and
		Principal Financial Officer)