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 February 23, 1997
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
March 23, 1997 was 238,804,275
PART I - FINANCIAL INFORMATION
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
FEB 23, MAY 26, FEB 25,
1997 1996 1996
________ ________ ________
ASSETS
Current assets:
Cash and cash equivalents $ 64.5 $ 113.7 $ 59.1
Receivables, less allowance for
doubtful accounts of $75.4, $52.1
and $72.4 2,053.0 1,428.4 2,092.0
Inventory:
Hedged commodities 1,143.6 1,369.4 1,484.9
Other 2,548.4 2,204.0 2,463.9
_________ _________ ________
Total inventory 3,692.0 3,573.4 3,948.8
Prepaid expenses 434.1 451.4 407.2
_________ _________ ________
Total current assets 6,243.6 5,566.9 6,507.1
_________ _________ ________
Property, plant and equipment:
Cost 5,321.2 4,971.3 5,291.2
Less accumulated depreciation 2,091.2 1,915.0 2,008.1
Less valuation reserve related
to restructuring 152.0 235.8 -
__________ _________ _________
Property, plant and equipment, net 3,078.0 2,820.5 3,283.1
Brands, trademarks and goodwill, at
cost less accumulated amortization 2,446.4 2,405.6 2,549.4
Other assets 409.6 403.6 415.6
__________ __________ __________
$ 12,177.6 $ 11,196.6 $ 12,755.2
__________ __________ __________
__________ __________ __________
The accompanying notes are an integral part of the consolidated
financial statements.
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
FEB 23, MAY 26, FEB 25,
1997 1996 1996
__________ __________ ________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,992.8 $ 416.3 $ 2,810.9
Current installments of
long-term debt 340.6 142.5 136.4
Accounts payable 2,025.1 1,856.9 1,785.8
Advances on sales 217.4 1,390.9 293.3
Other accrued liabilities 1,411.8 1,387.1 1,473.8
__________ __________ ________
Total current liabilities 5,987.7 5,193.7 6,500.2
__________ __________ ________
Senior long-term debt, excluding
current installments 1,583.5 1,512.9 1,600.3
Other noncurrent liabilities 911.5 959.5 904.7
Subordinated debt 750.0 750.0 750.0
Preferred securities of subsidiary
company 525.0 525.0 525.0
Common stockholders' equity:
Common stock of $5 par value,
authorized 1,200,000,000 shares,
issued 253,060,007, 252,990,917
and 253,151,573 1,265.3 1,264.9 1,265.8
Additional paid-in capital 573.0 423.1 454.4
Retained earnings 1,935.8 1,683.5 1,931.1
Foreign currency translation
adjustment (25.8) (39.1) (39.1)
Less treasury stock, at cost, common
shares 13,422,401, 9,834,464
and 10,073,548 (556.8) (390.0) (399.1)
__________ ________ _______
3,191.5 2,942.4 3,213.1
Less unearned restricted stock and
value of 13,854,176, 16,014,644 and
16,647,309 common shares held in EEF (771.6) (686.9) (738.1)
__________ _________ ________
Total common stockholders' equity 2,419.9 2,255.5 2,475.0
__________ _________ ________
$ 12,177.6 $11,196.6 $12,755.2
__________ _________ ________
__________ _________ ________
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
FEB 23, FEB 25,
1997 1996
__________ __________
Net sales $ 5,635.0 $ 5,772.9
__________ __________
Costs and expenses:
Cost of goods sold 4,757.4 4,905.2
Selling, general and
administrative expenses 561.2 570.5
Interest expense, net 73.3 82.6
__________ __________
5,391.9 5,558.3
__________ __________
Income before income taxes 243.1 214.6
Income taxes 98.0 86.2
__________ __________
Net income 145.1 128.4
Less preferred dividends - -
__________ __________
Net income available for common stock $ 145.1 $ 128.4
__________ __________
__________ __________
Earnings per common and common
equivalent share $ 0.63 $ 0.55
__________ __________
__________ __________
Weighted average number of common
and common equivalent shares
outstanding 229.8 232.7
__________ __________
__________ __________
Cash dividends declared per common
share $ 0.273 $ 0.238
__________ __________
__________ __________
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars and shares in millions except per share amounts)
THIRTY-NINE WEEKS ENDED
FEB 23, FEB 25,
1997 1996
__________ __________
Net sales $ 18,803.8 $ 18,839.0
__________ __________
Costs and expenses:
Cost of goods sold 16,176.1 16,217.0
Selling, general and
administrative expenses 1,689.4 1,740.4
Interest expense, net 216.1 236.1
__________ __________
18,081.6 18,193.5
__________ __________
Income before income taxes 722.2 645.5
Income taxes 293.7 262.9
__________ __________
Net income 428.5 382.6
Less preferred dividends - 8.6
__________ __________
Net income available for common stock $ 428.5 $ 374.0
__________ __________
__________ __________
Earnings per common and common
equivalent share $ 1.87 $ 1.63
__________ __________
__________ __________
Weighted average number of common
and common equivalent shares
outstanding 229.5 229.0
__________ __________
__________ __________
Cash dividends declared per common
share $ 0.783 $ 0.683
__________ __________
__________ __________
The accompanying notes are an integral part of the
consolidated financial statements.
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
THIRTY-NINE WEEKS ENDED
FEB 23, FEB 25,
Decrease in Cash and Cash Equivalents 1997 1996
__________ __________
Cash flows from operating activities
Net income $ 428.5 $ 382.6
Adjustments to reconcile net income to net
cash used in operating activities
Depreciation and other amortization 261.4 241.4
Goodwill amortization 52.2 54.0
Other noncash items (includes nonpension
postretirement benefits) (6.6) 30.2
Change in assets and liabilities before
effects from business acquisitions (1,593.7) (1,749.0)
__________ __________
Net cash flows from operating activities (858.2) (1,040.8)
__________ __________
Cash flows from investing activities:
Sale of property, plant and equipment 24.6 66.4
Additions to property, plant and equipment (446.1) (414.6)
Payment for business acquisitions (197.8) (493.6)
Monfort Finance Company notes
receivable (17.4) 70.4
Other items (14.3) 26.7
__________ __________
Net cash flows from investing activities (651.0) (744.7)
__________ __________
Cash flows from financing activities:
Net short-term borrowings 1,561.2 2,808.2
Decrease in accounts receivable sold (50.5) -
Proceeds from issuance of long-term debt 397.5 -
Cash dividends paid (168.5) (160.5)
Repayment of long-term debt (130.2) (163.0)
Treasury stock purchases (160.0) (664.0)
Employee Equity Fund stock transactions 12.4 7.5
Other items (1.9) (43.6)
__________ __________
Net cash flows from financing activities 1,460.0 1,784.6
__________ __________
Net decrease in cash and cash equivalents (49.2) (0.9)
Cash and cash equivalents at beginning of year 113.7 60.0
__________ __________
Cash and cash equivalents at end of period $ 64.5 $ 59.1
__________ __________
__________ __________
The accompanying notes are an integral part of the
consolidated financial statements.
CONAGRA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FEBRUARY 23, 1997
(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 1996 annual
report, which report was incorporated by reference in
Form 10-K for the fiscal year ended May 26, 1996.
(2) The composition of inventories is as follows (in
millions):
FEB 23, MAY 26, FEB 25,
1997 1996 1996
__________ __________ __________
Hedged commodities $ 1,143.6 $ 1,369.4 $ 1,484.9
Food products and livestock 1,252.2 1,219.9 1,385.3
Agricultural chemicals,
fertilizer and feed 498.4 399.4 430.0
Retail merchandise 106.0 122.7 163.4
Other, principally
ingredients and supplies 691.8 462.0 485.2
__________ __________ __________
$ 3,692.0 $ 3,573.4 $ 3,948.8
__________ __________ __________
__________ __________ __________
(3) On August 29, 1996, the Company purchased certain
assets of Gilroy Foods from McCormick & Company,
Inc. for approximately $121 million in cash. Gilroy
Foods, based in Gilroy, California, manufactures
dehydrated garlic and onion products principally for
industrial markets. Gilroy Foods' sales in 1995 were
approximately $200 million.
(4) 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 5/26/96 $ $1,264.9 $ $423.1 $ $1,683.5 $ ($39.1)$ ($390.0)$ ($686.9) $ $2,255.5
Shares issued
Stock option and
incentive plans 0.4 1.0 0.5 1.9
EEF*: stock option,
incentive and
other employee
benefit plans 7.0 57.0 64.0
Fair market
valuation of
EEF shares 141.9 (141.9) -
Acquisitions 0.5 0.5
Shares acquired
Incentive plans (7.8) 0.2 (7.6)
Treasury shares
purchased (160.0) (160.0)
Foreign currency
translation
adjustment 13.3 13.3
Cash dividends
declared -
common stock (176.2) (176.2)
Net income 428.5 428.5
___________ ___________ ___________ ___________ ___________ ___________ ___________
Balance 2/23/97 $ $1,265.3 $ $573.0 $ $1,935.8 $ ($25.8)$ ($556.8)$ ($771.6) $ $2,419.9
___________ ___________ ___________ ___________ ___________ ___________ ___________
___________ ___________ ___________ ___________ ___________ ___________ ___________
*Employee Equity Fund
(5) In fiscal 1991, 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.
As a result of a settlement reached with the
Internal Revenue Service in fiscal 1995, ConAgra
released $230.0 million of a valuation allowance and
reduced noncurrent liabilities by $135.0 million,
with a resulting reduction of goodwill associated
with the Beatrice acquisition of $365.0 million.
Various state tax returns of Beatrice 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 43 Superfund, proposed Superfund or
state-equivalent sites. Beatrice has paid or is in
the process of paying its liability share at 41 of
these 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 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.
(6) 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.
(7) The Company adopted Statement of Financial Accounting
Standards No. 125 ("SFAS 125"), which is effective
for transfers of financial assets beginning in 1997.
SFAS 125 will have no impact on the Company's reported
results of operation or financial position.
(8) On October 3, 1996, the Company issued $400 million
of senior notes with an interest rate of 7.125% due
October 1, 2026 and redeemable at the option of the
holders on October 1, 2006. The notes were priced at
99.375% of par.
(8) In December, 1996, the Company's Board of Directors
authorized ConAgra to purchase up to five million
shares of the Company's outstanding common stock
from time to time in the open market in continuation
of the Company's systematic pattern of common stock
purchases designed to avoid the dilutive effect on
earnings per share of stock based compensation
programs and acquisitions using stock accounted for
as purchases.
CONAGRA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 1997 third quarter and first nine
months are not necessarily indicative of results
which may be attained in the future.
FINANCIAL CONDITION
Versus fiscal year end 1996, the Company's capital
investment (working capital plus noncurrent assets)
increased $187.0 million. Working capital decreased
$117.3 million and noncurrent assets increased $304.3
million. The decrease in working capital resulted from an
increase in short-term debt due to business acquisitions,
normal property, plant and equipment additions, from
treasury stock purchases and a normal seasonal increase in
accounts receivable.
The Company's objective is that senior long-term debt
normally will not exceed 30 percent of total long-term debt
plus equity. At February 23,1997, senior long-term debt
was 30 percent of total long-term debt plus equity compared
to 30 percent at May 26,1996 and 30 percent at February 25,
1996.
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
FEB. 23, 1997 & FEB. 25, 1996
THIRTEEN WEEKS THIRTY-NINE WEEKS
DOLLARS % DOLLARS %
________________________________
Net sales (137.9) (2.4) (35.2) (0.2)
Cost of goods sold (147.8) (3.0) (40.9) (0.3)
Gross profit 9.9 1.1 5.7 0.2
Selling, general
and administrative expenses (9.3) (1.6) (51.0) (2.9)
Interest expense, net (9.3) (11.3) (20.0) (8.5)
Income before income taxes 28.5 13.3 76.7 11.9
Income taxes 11.8 13.7 30.8 11.7
Net income 16.7 13.0 45.9 12.0
Preferred Dividends - - (8.6) (100.0)
Net Income available for
common stock 16.7 13.0 54.5 14.6
Earnings per common and
common equivalent share 0.08 14.5 0.24 14.7
Two of ConAgra's industry segments, Grocery/Diversified
Products and Refrigerated Foods increased operating
profit in the third quarter while operating profit in the
Foods Inputs & Ingredients segment decreased, versus
third quarter fiscal 1996. Operating profit for the first
nine months of fiscal 1997, versus the same period in
fiscal 1996, increased in the Foods Inputs & Ingredients
and the Grocery/Diversified Products segments. The
increase in those segments was somewhat offset by a
decrease in the Refrigerated Foods segment operating
profit for the first nine months.
ConAgra's total sales and cost of sales were lower by
2 percent and 3 percent, respectively, in the third
quarter and about even for the first nine months of
fiscal 1997, compared to the same periods last year.
Selling, general and administrative expenses were down
2 percent in the third quarter and down 3 percent for
the first nine months of fiscal 1997 versus fiscal
1996. In the Grocery/Diversified Products segment,
sales and related cost of goods sold increased during
the third quarter and first nine months of fiscal 1997
versus fiscal 1996. In the Foods Inputs & Ingredients
segment, increased sales and cost of sales in the
specialty food ingredient and agri-products businesses
were offset by declines in the other businesses.
Refrigerated Foods segment sales and related cost of
sales declined in the third quarter and first nine
months. Selling, general and administrative expenses
for all segments in the third quarter and first nine
months of fiscal 1997 were lower than the same periods
in fiscal 1996. Net income increased $16.7 million in
the third quarter and $45.9 million in the first nine
months of fiscal 1997 versus the same periods last
year.
In the Grocery/Diversified Products segment, operating
profit increased 12 percent in the third quarter and
20 percent in the first nine months of fiscal 1997
versus the same periods last year. Sales increased 4
percent in fiscal 1997's third quarter and 8 percent
in the first nine months versus the same periods in
fiscal 1996. ConAgra Frozen Foods increased third
quarter and nine month operating profit over 20
percent. Hunt-Wesson's operating profit increased in
the third quarter and first nine months. Combined
Hunt-Wesson/Frozen Foods unit volume growth was up 4
percent through nine months, but down about 3 percent
in the third quarter, reflecting soft grocery industry
sales. Benefiting from value-added products, operating
productivity and volume growth, the Lamb-Weston potato
products business increased third quarter and nine
month operating profit. Golden Valley Microwave Foods'
operating profit was down in the third quarter but up
22 percent through nine months. Seafood operating
profit increased in both periods.
In ConAgra's Refrigerated Foods segment, operating profit
increased 35 percent in the third quarter and declined 11 percent
in the first nine months of fiscal 1997 versus the same periods
in fiscal 1996. Segment sales decreased 2 percent in the
third quarter and 3 percent in the first nine months of fiscal
1997 primarily due to beef and poultry restructuring
initiatives subsequent to last year's third quarter.
Branded processed meats, the segment's largest profit contributor
increased operating profit 24 percent in the third quarter
and 13 percent for the first nine months of fiscal 1997.
U.S beef operating profit rebounded in this year's
third quarter and was up through nine months.
Australia beef operating profit improved in both
periods. Third quarter and nine month operating profit
decreased in the pork business. However, the Company
considers this earnings level to be satisfactory given
the industry's current high cost of raw materials.
Poultry products operating profit decreased in both
periods as did operating profit in the cheese
business.
In ConAgra's Food Inputs & Ingredients segment,
operating profit decreased 14 percent in the third
quarter and increased 6 percent in the first nine months of
fiscal 1997 compared to the same periods in fiscal
1996. Segment sales decreased 10 percent in the third
quarter and 1 percent through nine months. Business
dispositions, lower wheat prices and reduced
international fertilizer sales drove the sales
decline. Third quarter operating profit gains in a
number of businesses, notably flour milling and
specialty food ingredients, were more than offset by
declines in other businesses, in particular specialty
grain and grain merchandising. Sources of the nine
month operating profit gain included flour milling,
specialty food ingredients, European operations and
dry edible beans partially offset by profit declines
in specialty grain and other businesses. United Agri
Products, the major crop inputs business, and
specialty retailing increased operating profit in
both periods.
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 operating profit. For
financial businesses, operating profit includes the effect of
interest, which is a large element of their operating costs.
Summarizing ConAgra's results for fiscal 1997's third quarter
compared to fiscal 1996's third quarter: earnings per share 63
cents, up 14.5 percent from 55 cents; net income and net income
available for common stock (net income minus preferred dividends)
$145.1 million, up 13 percent from $128.4 million; net sales $5.64
billion, down 2 percent from $5.77 billion.
For fiscal 1997's first nine months: earnings per
share $1.87, up 14.7 percent from $1.63; net income
$428.5 million, up 12 percent from $382.6 million; net
income available for common stock $428.5 million, up
15 percent from $374.0 million; net sales $18.80 billion, down
from $18.84 billion.
As mentioned, fiscal 1997 third quarter and nine month
sales were reduced by business dispositions and
restructuring initiatives. For the nine month period,
the relevant net earnings comparison is net income
available for common stock because it includes
comparable financing expense in both years: preferred
dividends in fiscal 1996 and the cost of preferred
stock redemption in fiscal 1997.
Weighted average shares outstanding decreased in
fiscal 1997's third quarter over the same period in
fiscal 1996 primarily due to the timing of common
stock repurchases.
CONAGRA, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 2(c). RECENT SALES OF UNREGISTERED SECURITIES
ConAgra issued 23,159 shares of its common stock
in connection with the acquisition of Creative
Seasonings, Inc. in a merger transaction on
January 10, 1997. The common stock was issued to
the two shareholders of Creative Seasonings, Inc.
in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act of
1933 and Regulation D thereunder.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS.
10.1 - Employment contracts between the
Company and Bruce Rohde.
10.2 - Second Amendment to the Directors'
Unfunded Deferred Compensation
Plan.
12 - Statement regarding computation of
ratio of earnings to fixed charges.
(B) REPORTS ON FORM 8-K.
None.
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 8th day of April, 1997.
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
10.1 Employment contracts between the
Company and Bruce Rohde.............. 18
10.2 Second Amendment to the Directors'
Unfunded Deferred Compensation Plan.. 35
12 Statement regarding computation of
ratio of earnings to fixed charges... 36