UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 27, 1995
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 1-7275
___________________________________________
CONAGRA, INC.
__________________________________________________________________
(Exact name of registrant, as specified in charter)
Delaware 47-0248710
__________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One ConAgra Drive, Omaha, Nebraska 68102-5001
__________________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
(402) 595-4000
__________________________________________________________________
(Registrant's telephone number, including area code)
NA
__________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the 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 registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
_______ _______
Number of shares outstanding of issuer's common stock, as of
September 24, 1995 was 238,471,961
PART I - FINANCIAL INFORMATION
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
AUG 27, MAY 28, AUG 28,
1995 1995 1994
_________ _________ _________
ASSETS
Current assets:
Cash and cash equivalents $ 92.2 $ 60.0 $ 42.1
Receivables, less allowance for
doubtful accounts of $61.3, $63.9
and $67.0 2,472.3 1,540.0 2,407.1
Margin deposits and segregated
funds - - 344.8
Inventory:
Hedged commodities 1,037.9 925.4 716.5
Other 2,471.8 2,241.9 2,465.2
_________ _________ _________
Total inventory 3,509.7 3,167.3 3,181.7
Prepaid expenses 401.5 372.9 239.3
_________ _________ _________
Total current assets 6,475.7 5,140.2 6,215.0
_________ _________ _________
Property, plant and equipment
at cost, less accumulated
depreciation of $1800.5, $1741.8
and $1629.7 2,865.7 2,796.0 2,695.7
Brands, trademarks and goodwill, at
cost less accumulated amortization 2,519.1 2,420.1 2,626.2
Other assets 429.7 444.7 398.9
_________ _________ _________
$12,290.2 $10,801.0 $ 11,935.8
_________ _________ _________
_________ _________ _________
The accompanying notes are an integral part of the consolidated
financial statements.
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
AUG 27, MAY 28, AUG 28,
1995 1995 1994
_________ _________ _________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 3,062.5 $ - $ 2,860.3
Current installments of
long-term debt 108.1 47.9 124.1
Accounts payable 1,004.1 1,574.8 1,031.4
Advances on sales 190.2 856.6 110.8
Payable to customers, clearing
associations, etc. - - 346.0
Other accrued liabilities 1,463.1 1,485.6 1,303.7
_________ _________ _________
Total current liabilities 5,828.0 3,964.9 5,776.3
_________ _________ _________
Senior long-term debt, excluding
current installments 1,664.2 1,770.0 1,423.9
Other noncurrent liabilities 920.4 940.8 1,065.1
Subordinated debt 750.0 750.0 766.0
Preferred securities of subsidiary
company 525.0 525.0 275.0
Preferred shares subject to
mandatory redemption 269.5 354.9 355.6
Common stockholders' equity:
Common stock of $5 par value,
authorized 1,200,000,000 shares,
issued 252,922,486, 252,869,958
and 252,791,925 1,264.6 1,264.3 1,264.0
Additional paid-in capital 513.7 409.9 426.7
Retained earnings 1,748.1 1,712.5 1,452.8
Foreign currency translation
adjustment (45.2) (44.9) (30.6)
Less treasury stock, at cost, common
shares 12,353,384, 7,172,312
and 4,696,512 (414.8) (206.9) (121.3)
_________ _________ _________
3,066.4 3,134.9 2,991.6
Less unearned restricted stock and
value of 18,239,477, 19,423,916 and
21,544,551 common shares held in EEF (733.3) (639.5) (717.7)
_________ _________ _________
Total common stockholders' equity 2,333.1 2,495.4 2,273.9
_________ _________ _________
$12,290.2 $10,801.0 $ 11,935.8
_________ _________ _________
_________ _________ _________
The accompanying notes are an integral part of the consolidated
financial statements.
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars and shares in millions except per share amounts)
THIRTEEN WEEKS ENDED
AUG 27, AUG 28,
1995 1994
_________ _________
Net sales $ 6,436.4 $ 6,245.9
_________ _________
Costs and expenses:
Cost of goods sold 5,634.4 5,506.8
Selling, administrative and
general expenses 578.3 545.1
Interest expense, net 75.9 68.7
_________ _________
6,288.6 6,120.6
_________ _________
Income before equity in earnings of
affiliates and income taxes 147.8 125.3
Equity in earnings(loss) of affiliates (0.2) 2.7
_________ _________
Income before income taxes 147.6 128.0
Income taxes 60.5 51.2
_________ _________
Net income 87.1 76.8
Less preferred dividends 5.1 6.0
_________ _________
Net income available for common stock $ 82.0 $ 70.8
_________ _________
_________ _________
Earnings per common and common
equivalent share $ 0.36 $ 0.31
_________ _________
_________ _________
Weighted average number of common
and common equivalent shares
outstanding 227.5 228.6
_________ _________
_________ _________
Cash dividends declared per common
share $ 0.208 $ 0.180
_________ _________
_________ _________
The accompanying notes are an integral part of the
consolidated financial statements.
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
THIRTEEN WEEKS ENDED
AUG 27, AUG 28,
Increase (decrease in Cash and Cash Equivalents) 1995 1994
_________ _________
Cash flows from operating activities:
Net income $ 87.1 $ 76.8
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and other amortization 87.2 77.9
Goodwill amortization 17.7 17.1
Other noncash items (includes nonpension
postretirement benefits) 16.7 17.4
Change in assets and liabilities before
effects from business acquisitions (2,600.0) (2,651.6)
_________ _________
Net cash flows from operating activities (2,391.3) (2,462.4)
_________ _________
Cash flows from investing activities:
Sale of property, plant and equipment 8.6 1.9
Additions to property, plant and equipment (120.9) (76.6)
Payment for business acquisitions (162.7) (163.0)
Decrease in notes receivable-Monfort Finance
Company 39.8 64.8
Other items 0.4 (31.9)
_________ _________
Net cash flows from investing activities (234.8) (204.8)
_________ _________
Cash flows from financing activities:
Net short term borrowings 3,062.5 2,441.3
Proceeds from exercise of employee stock
options 17.4 5.4
Cash dividends paid (53.1) (46.6)
Repayment of long-term debt (46.5) (14.0)
Treasury stock purchases (311.6) -
Issuance of preferred securities of
a subsidiary company - 175.0
Employee Equity Fund stock transactions 1.9 1.0
Other items (12.3) (19.2)
_________ _________
Net cash flows from financing activities 2,658.3 2,542.9
_________ _________
Net increase (decrease) in cash & cash equivalents 32.2 (124.3)
Cash and cash equivalents at beginning of year 60.0 166.4
_________ _________
Cash and cash equivalents at end of period $ 92.2 $ 42.1
_________ _________
_________ _________
The accompanying notes are an integral part of the
consolidated financial statements.
CONAGRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
AUGUST 27, 1995
(1) The information furnished herein relating to interim
periods has not been examined by independent Certified
Public Accountants. In the opinion of management, all
adjustments necessary for a fair statement of the
results for the periods covered have been included.
All such adjustments are of a normal recurring nature.
The accounting policies followed by the Company, and
additional footnotes, are set forth in the financial
statements included in the Company's 1995 annual
report, which report was incorporated by reference in
Form 10-K for the fiscal year ended May 28, 1995.
(2) The composition of inventories is as follows (in
millions):
AUG 27, MAY 28, AUG 28,
1995 1995 1994
________ ________ ________
Hedged commodities $1,037.9 $ 925.4 $ 716.5
Food products and livestock 1,253.8 1,232.2 1,386.0
Agricultural chemicals,
fertilizer and feed 583.8 323.1 499.8
Retail merchandise 180.2 196.4 176.0
Other, principally
ingredients and supplies 454.0 490.2 403.4
________ ________ ________
$3,509.7 $3,167.3 $3,181.7
________ ________ ________
________ ________ ________
(3) Following is a condensed statement of common stockholders'
equity (in millions):
<captions>
Unearned
Add'l Foreign Restricted
Common Paid-In Retained Curr Treasury & EEF
Stock Capital Earnings Trns Adj Stock Stock Total
__________ __________ __________ __________ __________ __________ __________
Balance 5/28/95 $ $1,264.3 $ $409.9 $ $1,712.5 $ ($44.9)$ ($206.9)$ ($639.5) $ $2,495.4
Shares issued
Employee stock
options 0.2 0.3 0.1 (0.1) 0.5
EEF* stock option,
incentive and
other employee
benefit plans (2.0) 32.3 30.3
Fair market
valuation of
EEF shares 126.2 (126.2) -
Acquisitions 0.1 0.4 0.5
Conversion of
preferred stock (21.1) 106.5 85.4
Shares acquired
Incentive plans (2.9) 0.2 (2.7)
Treasury shares
purchased (311.6) (311.6)
Foreign currency
translation
adjustment (0.3) (0.3)
Cash dividends
declared (51.5) (51.5)
Net income 87.1 87.1
__________ __________ __________ __________ __________ __________ __________
Balance 8/27/95 $ $1,264.6 $ $513.7 $ $1,748.1 $ ($45.2)$ ($414.8)$ ($733.3) $ $2,333.1
__________ __________ __________ __________ __________ __________ __________
__________ __________ __________ __________ __________ __________ __________
*Employee Equity Fund
(4) On August 14, 1990, ConAgra acquired Beatrice Company
(Beatrice). As a result of the acquisition and the
significant pre-acquisition tax and other contingencies
of the Beatrice businesses and its former subsidiaries,
the consolidated post-acquisition financial statements
of ConAgra have reflected significant liabilities and
valuation allowances associated with the estimated
resolution of these contingencies.
Subsequent to the acquisition of Beatrice by ConAgra,
the Internal Revenue Service completed its audit of the
federal income tax returns of Beatrice and its
predecessors for the fiscal years ended in 1985 through
1987 and issued an examining agent's report. The
findings contained in the report were protested by
Beatrice. Agreement was reached with the Internal
Revenue Service regarding these matters in August 1995.
This settlement resolves all deficiencies proposed by
the Internal Revenue Service for 1987 and prior years,
including deficiencies relating to previously-filed
carry-back claims. The settlement allowed ConAgra to
better estimate the amounts of Beatrice state tax
liabilities that will ultimately be paid to various
state tax authorities, and the amounts of state tax and
interest that will be deductible for federal income tax
purposes. Prior to the settlement, ConAgra had recorded
a valuation allowance against deferred tax assets of
approximately $230.0 million due to uncertainties as to
the ultimate realization of these assets.
As a result of the settlement, ConAgra has released the
$230.0 million valuation allowance and has reduced
noncurrent liabilities by $135.0 million, with a
resulting reduction of goodwill associated with the
Beatrice acquisition of $365.0 million. Federal income
tax returns of Beatrice for fiscal years ended 1988,
1989 and 1990 and various state tax returns remain
open. However, after taking into account the foregoing
adjustments, management believes that the ultimate
resolution of all remaining pre-acquisition Beatrice
tax contingencies should not exceed the reserves
established for such matters.
Beatrice is also engaged in various litigation and
environmental proceedings related to businesses
divested by Beatrice prior to its acquisition by
ConAgra. The environmental proceedings include
litigation and administrative proceedings involving
Beatrice's status as a potentially responsible party at
42 Superfund, proposed Superfund or state-equivalent
sites. Beatrice has paid or is in the process of paying
its liability share at 33 of these sites. Beatrice's
known volumetric contribution exceeds 4% at seven of
the sites. Beatrice has established substantial
reserves for these matters. The environmental reserves
are based on Beatrice's best estimate of its
undiscounted remediation liabilities, which estimates
include evaluation of investigatory studies, extent of
required cleanup, the known volumetric contribution of
Beatrice and other potentially liable responsible
parties and Beatrice's prior experience in remediating
sites. Management believes the ultimate resolution of
such Beatrice legal and environmental contingenices
should not exceed the reserves established for such
matters.
ConAgra is party to a number of other lawsuits and
claims arising out of the operation of its businesses.
After taking into account liabilities recorded for all
of the foregoing matters, management believes the
ultimate resolution of such matters should not have a
material adverse effect on ConAgra's financial
condition, results of operation or liquidity.
(5) Earnings per common and common equivalent share are
calculated on the basis of the weighted average
outstanding common shares and, when applicable,
those outstanding options that are dilutive and
after giving effect to the preferred stock dividend
requirements. Fully diluted earnings per share did
not differ significantly from primary earnings per
share in any period presented.
CONAGRA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
condition and operating results for the periods included in the
accompanying consolidated condensed financial statements.
Results for the fiscal 1996 first quarter are not necessarily
indicative of results which may be attained in the future.
FINANCIAL CONDITION
During the first quarter of fiscal 1996, the Company's
capital investment (working capital plus noncurrent assets)
decreased $373.9 million. Working capital decreased
$527.6 million and noncurrent assets increased $153.7 million.
The decrease in working capital resulted from an increase
in notes payable due to a business acquisition and normal
property, plant and equipment additions, and from treasury
stock purchases (see below). The increase in notes payable was
was also due to the normal seasonal increase in accounts
receivable and inventory. The decrease in payables to
customers and margin deposits and segregated funds from
the prior year first quarter is the result of the sale of
Geldermann, Inc. during the third quarter of fiscal 1995.
The increase in other noncurrent assets is primarily due
to a business acquisition and normal additions to
property, plant and equipment. Versus the same period last
year, property, plant and equipment increased $170
million, mainly as the result of acquisitions. This
increase was funded by a combination of operating cash
flow and an increase in notes payable.
The Company's objective is that senior long-term debt
normally will not exceed 30 percent of total long-term debt
plus equity. At August 27, 1995, senior long-term debt
was 30 percent of total long-term debt plus equity compared
to 30 percent at May 28, 1995 and 28 percent at August 28, 1994.
The Company has indicated it intends to call some or all
of its Class E $25.00 cumulative convertible preferred
stock during calendar year 1995, subject to market
conditions and director approval. As of September 26, 1995
the Company has purchased, in the open market, 14,436,587
shares of common stock at an aggregate cost of $516.8 million
since February 1995. Such purchases are intended to cover the
anticipated conversion of the Class E preferred stock.
On September 30, 1995 the Company commenced a tender offer
for all outstanding common stock of Canada Malting Co.
Limited, one of the world's largest producers of malted
barley. The tender offer is subject to certain conditions
and is scheduled to expire October 31, 1995, subject to
extension. If the tender offer is successful, the total
amount required to purchase the common stock and pay
related expenses is approximately U.S. $296.0 million.
OPERATING RESULTS
A summary of the period to period increases (decreases) in
the principal components of operations is shown below
(dollars in millions, except per share amounts).
COMPARISON OF THE PERIODS ENDED
AUG. 27, 1995 & AUG. 28, 1994
THIRTEEN WEEKS
DOLLARS %
________________
Net sales 190.5 3.1
Cost of goods sold 127.6 2.3
Gross profit 62.9 8.5
Selling, administrative
and general expense 33.2 6.1
Interest expense, net 7.2 10.5
Income before equity in
earnings of affiliates and
income taxes 22.5 18.0
Equity in earnings of
affiliates (2.9) NM*
Income before income taxes 19.6 15.3
Income taxes 9.3 18.2
Net income 10.3 13.4
Earnings per common and common
equivalent share 0.05 16.1
*Not Measurable
All three of ConAgra's industry segments, Food Inputs &
Ingredients, Refrigerated Foods and Grocery/Diversified
Products achieved operating profit growth in the first
quarter of fiscal 1996 over fiscal 1995's first quarter.
Sources of increased sales and expenses during the first
quarter included the international trading businesses,
the grocery products companies and the potato products
businesses.
In the Refrigerated Foods segment, a major contributor
to the growth in operating profit was the fresh meat
business as beef margins benefited from abundant raw
materials and good demand. Branded packaged meats,
turkey products and cheese products also contributed
to earnings gains. Chicken products earnings declined,
but are expected to improve as the year progresses.
In the Grocery/Diversified segment, all three major
businesses contributed to first quarter operating
profit growth. The growth in earnings in the
Lamb-Weston potato products business was due, in
part, to an acquisition last year. Healthy Choice
products continued to contribute to the earnings
growth in consumer frozen foods while Hunt Foods
drove Hunt-Wesson's operating profit growth.
In the Food Inputs & Ingredients segment, the
principal sources of first quarter operating profit
growth were grain merchandising, international
fertilizer marketing and management actions last year
to eliminate unhealthy businesses. Grain processing
earnings decreased due to weak flour milling results.
Crop input earnings declined as wet weather deferred
pesticide and fertilizer sales from the first to second
quarter. Specialty retailing earnings were down.
Acquisitions, as well as unit volume increases,
contributed to ConAgra's first quarter sales growth,
partially offset by the divestiture of non-core
businesses and the weather-related decline in crop
input sales.
Operating profit is based on net sales less all
identifiable operating expenses and includes the
related equity in earnings of companies included on the
basis of the equity method of accounting. General
corporate expense, interest expense (except financial
businesses) income taxes and goodwill amortization are
excluded from segment operations. For financial
businesses, operating profit includes the effect of
interest, which is a large element of their operating
costs.
ConAgra's first quarter effective tax rate increased from
40 percent in fiscal 1995 to 41 percent in fiscal 1996
principally because of lower equity in earnings of
affiliates. Weighted average shares outstanding decreased
in fiscal 1996's first quarter over fiscal 1995's first
quarter primarily as a result of common stock repurchases.
Preferred dividends decreased because of conversion of a
portion of Class E preferred stock.
ConAgra is in the process of divesting certain non-core
businesses. During fiscal 1995, ConAgra divested Consumer
Direct (direct mail marketing), Dyno Merchandise, Inc.
(home sewing accessories), Geldermann, Inc. (financial
services), and Berliner & Marx, Inc. (meat products). In
July 1995, ConAgra also completed the sale of Petrosul
International (sulfur processing and marketing) and Alum
Rock Foodservice (cheese distribution). In October 1995,
ConAgra completed the sale of Omaha Vaccine (animal care
products). Sales and earnings of the businesses divested
and identified for divestiture are not material to
ConAgra's results of operations. The company expects that
the ultimate gain or loss on the divestiture program will
not be significant to ConAgra's results of operations.
ConAgra is required to adopt SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," no later than fiscal 1997.
ConAgra has not yet quantified the effect, if any, of
implementation on the financial statements.
CONAGRA, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
ConAgra's annual meeting of stockholders was held on
September 28, 1995. The stockholders elected four directors to
serve three-year terms, approved ConAgra's 1995 Stock Plan, and
ratified the appointment of Deloitte & Touche to examine ConAgra's
financial statements. Voting on these items was as following:
1. ELECTION OF DIRECTORS.
FOR WITHHELD
C. M. Harper 200,507,381 7,585,304
Carl E. Reichardt 206,617,544 1,475,141
Marjorie M. Scardino 206,321,727 1,770,985
William G. Stocks 206,286,287 1,806,398
2. RATIFICATION OF ACCOUNTANTS
FOR: 206,528,601
AGAINST: 679,105
ABSTAIN: 884,979
BROKER/NON-VOTES: -0-
3. APPROVAL OF CONAGRA'S 1995 STOCK PLAN
FOR: 178,255,617
AGAINST: 27,439,082
ABSTAIN: 2,397,986
BROKER/NON-VOTES: -0-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS.
10.1 - ConAgra 1995 Stock Plan
12 - Statement regarding computation of ratio
of earnings to fixed charges, and ratio
of earnings to combined fixed charges and
preferred dividends.
27 - Financial Data Schedule.
(B) REPORTS ON FORM 8-K.
ConAgra did not file any reports on Form 8-K for
the quarter ended August 27, 1995.
CONAGRA, INC.
By: /s/ James P. O'Donnell
________________________
James P. O'Donnell
Senior Vice President and
Chief Financial Officer
By: /s/ Kenneth W. DiFonzo
_____________________________
Kenneth W. DiFonzo
Vice President and Controller
Dated this 10 day of October, 1995. EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
10.1 - ConAgra 1995 Stock Plan.......................
12 - Statement regarding computation of ratio
of earnings to fixed charges, and ratio
of earnings to combined fixed charges
and preferred dividends.......................
27 - Financial Data Schedule.......................