ConAgra Foods, Inc. and Subsidiaries
Unaudited Pro Forma Combined Condensed Statements of Earnings
For the Thirty-nine weeks ended February 25, 2001
(amounts in millions, except per share data)
The following unaudited pro forma combined condensed statements of earnings give effect to the merger of International Home Foods, Inc. with and into a wholly owned subsidiary of ConAgra Foods, Inc. on August 24, 2000 using the purchase method of accounting, after giving effect to the pro forma adjustments described in the accompanying notes. The unaudited pro forma combined condensed statements of earnings should be read in conjunction with the audited and unaudited historical consolidated financial statements and notes of ConAgra Foods and International Home Foods.
The unaudited pro forma combined condensed statements of earnings give effect to the merger as if it had occurred at the beginning of the period presented. ConAgra Foods' fiscal year ended on May 28, 2000 and International Home Foods' fiscal year ended on December 31, 1999. The unaudited pro forma combined condensed statements of earnings for the year ended May 28, 2000 and the thirty-nine weeks ended February 25, 2001 combine the historical consolidated statements of earnings (as restated) of ConAgra Foods with the recasted unaudited consolidated statements of earnings of International Home Foods for the twelve-month and three-month periods ended June 30, 2000. For purposes of presenting the unaudited pro forma combined condensed statements of earnings, International Home Foods' fiscal year has been recasted to June 30, 2000, by including the unaudited reported financial statements for the quarter ended June 30, 2000 and the three previous quarters ended March 31, 2000, December 31, 1999 and September 30, 1999. The merger is reflected in ConAgra Foods' historical unaudited consolidated balance sheet as of February 25, 2001, and accordingly no pro forma balance sheet is provided.
The unaudited pro forma adjustments described in the accompanying notes are based upon preliminary estimates and assumptions that the managements of ConAgra Foods and International Home Foods believe are reasonable. The pro forma adjustments are based on the information and assumptions currently available. The purchase price allocation will be completed after the finalization of asset and liability valuations. The unaudited pro forma combined condensed statements of earnings are presented for illustrative purposes only and do not purport to be indicative of the operating results or financial position that would have actually occurred if the merger had been in effect on the dates indicated, nor is it necessarily indicative of future operating results of the merged companies. The unaudited pro forma combined condensed financial statements do not give effect to any potential cost savings or other operating synergies that ConAgra Foods expects to result from the transaction.
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Pro Forma | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | ConAgra Foods Thirty-nine weeks Ended February 25, 2001(1) | International Home Foods Three months Ended June 30, 2000(2) | |||||||||||
| | Adjustments(3) | Combined | |||||||||||
| Net Sales | $ | 20,756.6 | $ | 530.6 | $ | (92.5 | ) | $ | 21,194.7 | ||||
Costs and Expenses: | |||||||||||||
| Cost of goods sold | 17,783.0 | 270.5 | 26.0 | 18,079.5 | |||||||||
| Selling, general and administrative expenses | 1,740.5 | 189.1 | (106.1 | ) | 1,823.5 | ||||||||
| Interest expense | 323.2 | 24.3 | 13.3 | 360.8 | |||||||||
| 19,846.7 | 483.9 | (66.8 | ) | 20,263.8 | |||||||||
| Income before income taxes and cumulative effect of changes in accounting | 909.9 | 46.7 | (25.7 | ) | 930.9 | ||||||||
| Income taxes | 348.8 | 17.7 | (7.4 | ) | 359.1 | ||||||||
| Income before cumulative effect of changes in accounting | $ | 561.1 | $ | 29.0 | $ | (18.3 | ) | $ | 571.8 | ||||
| Income before cumulative effect of changes in accounting per share—basic(4): | $ | 1.11 | $ | .39 | $ | 1.11 | |||||||
| Income before cumulative effect of changes in accounting per share—diluted(4): | $ | 1.10 | $ | .38 | $ | 1.09 | |||||||
See notes to unaudited pro forma combined condensed financial statements.
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ConAgra Foods, Inc. and Subsidiaries
Unaudited Pro Forma Combined Condensed Statements of Earnings
For the year ended May 28, 2000
(amounts in millions, except per share data)
Pro Forma | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | International Home Foods Fiscal Year Ended June 30, 2000(2) | |||||||||||
| | ConAgra Foods Fiscal Year Ended May 28, 2000(1) | ||||||||||||
| | Adjustments(3) | Combined(5) | |||||||||||
| Net Sales | $ | 25,534.6 | $ | 2,209.7 | $ | (375.6 | ) | $ | 27,368.7 | ||||
Costs and Expenses: | |||||||||||||
| Cost of goods sold | 22,182.9 | 1,150.8 | 108.4 | 23,442.1 | |||||||||
| Selling, general and administrative expenses | 2,108.1 | 762.6 | (434.2 | ) | 2,436.5 | ||||||||
| Interest expense | 303.8 | 99.9 | 50.8 | 454.5 | |||||||||
| Restructuring/Impairment charges | 322.2 | — | — | 322.2 | |||||||||
| 24,917.0 | 2,013.3 | (275.0 | ) | 26,655.3 | |||||||||
| Income before income taxes | 617.6 | 196.4 | (100.6 | ) | 713.4 | ||||||||
| Income taxes | 235.3 | 96.1 | (28.8 | ) | 302.6 | ||||||||
| Net Income | $ | 382.3 | $ | 100.3 | $ | (71.8 | ) | $ | 410.8 | ||||
| Income per share—basic(4): | $ | .80 | $ | 1.36 | $ | .80 | |||||||
| Income per share—diluted(4): | $ | .80 | $ | 1.32 | $ | .79 | |||||||
See notes to unaudited pro forma combined condensed financial statements.
On August 24, 2000, ConAgra Foods acquired all of the issued and outstanding shares of common stock and stock options of International Home Foods in a transaction accounted for as a purchase business combination. The assets acquired and liabilities assumed will be assigned a portion of the purchase price equal to their respective fair market values at August 24, 2000. The unaudited pro forma combined condensed financial statements are based on the following:
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ConAgra Foods expects to allocate a portion of the purchase price to buildings, machinery and equipment and other intangible assets. Assuming these assets had a weighted average life of 20 years, for each $100.0 million allocated to buildings, machinery and equipment or other intangible assets, pro forma operating expenses would increase by $3.5 million and pro forma net income would decrease by $1.6 million.
| | Thirty-nine weeks ended February 25, 2001 | Fiscal Year Ended May 28, 2000 | ||||||
|---|---|---|---|---|---|---|---|---|
| Interest expense on credit facilities | $ | 31.1 | $ | 124.5 | ||||
| Interest expense on long-term borrowings | 6.5 | 26.2 | ||||||
| IHF historical interest expense | (24.3 | ) | (99.9 | ) | ||||
| Net adjustment | $ | 13.3 | $ | 50.8 | ||||
A .125% change in the interest rate on the new indebtedness would change interest expense by approximately $.6 million and $2.5 million for the thirty-nine weeks ended February 25, 2001 and fiscal year ended May 28, 2000, respectively.
| | Thirty-nine weeks Ended February 25, 2001 | Fiscal Year Ended May 28, 2000 | ||
|---|---|---|---|---|
| Basic: | ||||
| Historical shares outstanding | 507.5 | 475.7 | ||
| Effect of shares issued | 13.7 | 41.0 | ||
| 521.2 | 516.7 | |||
| Diluted: | ||||
| Historical shares and share equivalents outstanding | 510.6 | 478.6 | ||
| Effect of shares issued | 13.7 | 41.0 | ||
| Effect of options assumed | .9 | 2.6 | ||
| 525.2 | 522.2 | |||
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charges, unaudited pro forma basic income per share for fiscal 2000 would be $1.54 and unaudited pro forma diluted income per share would be $1.52.
| | Thirty-nine weeks Ended February 25, 2001 | Fiscal Year Ended May 28, 2000 | ||||||
|---|---|---|---|---|---|---|---|---|
| Fixed Charges as defined: | ||||||||
| Interest expense | $ | 383.2 | $ | 502.0 | ||||
| Capitalized interest | 3.9 | 5.5 | ||||||
| Interest in cost of goods sold | 25.7 | 31.4 | ||||||
| Preferred distributions of subsidiary | 18.3 | 43.0 | ||||||
| One third of non-cancelable lease rent | 24.5 | 35.2 | ||||||
| Total fixed charges (A) | $ | 455.6 | $ | 617.1 | ||||
| Earnings as defined: | ||||||||
| Pretax income after elimination of undistributed earnings of equity method investees | $ | 929.0 | $ | 701.4 | ||||
| Add fixed charges | 455.6 | 617.1 | ||||||
| Less capitalized interest | (3.9 | ) | (5.5 | ) | ||||
| Earnings and fixed charges (B) | $ | 1,380.7 | $ | 1,313.0 | ||||
| Ratio of earnings to fixed charges (B/A) | 3.0 | 2.1 | ||||||
The pro forma ratio of earnings to fixed charges for the fiscal year ended May 28, 2000 includes restructuring plan charges of $621.4 million. Excluding these restructuring plan charges, the pro forma ratio of earnings to fixed charges for the fiscal year ended May 28, 2000 would be 3.1.
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