QUESTIONS AND ANSWERS
1. What does UAP do?
UAP, which stands for United Agri Products Companies, operates with 433
locations in the U.S. and 97 locations outside of the U.S. and
distributes seed, fertilizer, and agricultural chemicals to the
agricultural production community.
2. Where are UAP's financial results located in your financial statements?
UAP is one of three businesses which are reported in our Agricultural
Products reporting segment. Our Agricultural Products segment reflects
results for:
* UAP
* ConAgra Trade Group
* Food Ingredients.
3. In fiscal 1998 through 2000, what percentage of ConAgra Foods' sales
and operating profit did UAP represent?
In each of those years, UAP represented approximately 13% of total
company sales and approximately 9% of total company operating profit.
4. What is the estimated impact of the restatement on previously reported
financial highlights for 1998, 1999 and 2000 (dollars in millions
except per-share amounts):
- --------------------- ------------------------------------------------------------------------------------------------
Before Restatement
Excluding Restructuring and Restructuring-Related Charges
- --------------------- ------------------------------------------------------------------------------------------------
Reporting Period Net Operating Income Income Before Net Income per
Sales (1) Income Taxes Income Share-diluted
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
1998 24,271.1 1,572.9 1,041.0 627.0 1.35 (2)
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
1999 25,020.2 1,706.3 1,123.1 696.3 1.46
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
2000 25,805.4 1,909.7 1,287.5 798.3 1.67
- --------------------- ------------------------------------------------------------------------------------------------
- --------------------- ------------------------------------------------------------------------------------------------
After Restatement
Excluding Restructuring and Restructuring-Related Charges
- --------------------- ------------------------------------------------------------------------------------------------
Reporting Period Net Operating Income Income Before Net Income per
Sales (1) Income Taxes Income Share-diluted
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
1998 24,192.1 1,546.2 1,014.3 610.5 1.32 (2)
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
1999 24,923.9 1,669.3 1,086.1 673.6 1.41
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
2000 25,631.0 1,851.2 1,229.0 762.2 1.60
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------------------------------------------------------------------------------------
Before Restatement
Including Restructuring and Restructuring-Related Charges
- --------------------- ------------------------------------------------------------------------------------------------
Reporting Period Net Operating Income Income Before Net Income per
Sales (1) Income Taxes Income Share-diluted
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
1998 24,271.1 1,572.9 1,041.0 627.0 1.35 (2)
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
1999 25,020.2 1,265.5 682.3 358.4 0.75
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
2000 25,805.4 1,288.3 666.1 413.0 0.86
- --------------------- ------------------------------------------------------------------------------------------------
- --------------------- ------------------------------------------------------------------------------------------------
After Restatement
Including Restructuring and Restructuring-Related Charges
- --------------------- ------------------------------------------------------------------------------------------------
Reporting Period Net Operating Income Income Before Net Income per
Sales (1) Income Taxes Income Share-diluted
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
1998 24,192.1 1,546.2 1,014.3 610.5 1.32 (2)
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
1999 24,923.9 1,228.5 645.3 355.7 0.70
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
2000 25,631.0 1,229.8 607.6 376.9 0.79
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
(1) Certain reclassifications have been made to prior year amounts to conform
with current year classifications.
(2) Income per share is before a $.03 cumulative effect of change in accounting.
5. What is the estimated impact of the restatement on fiscal 2001?
For fiscal 2001, the restatement is estimated to increase net sales by
$350 million, increase income before income taxes by $127 million and
increase income per fully-diluted share by $.15.
6. How much of your estimated adjustment of $.15 of fully-diluted earnings
per share for fiscal 2001 will increase your fully-diluted earnings per
share previously reported for the first three quarters of fiscal 2001?
Approximately $.03
7. Does the restatement of earnings for fiscal 1998 through 2000, and the
first nine months of fiscal 2001 change the cash flow throughout the
restatement period?
No. The restatement does not change the cumulative cash generated
across the restatement period. This is due to the fact that while net
income for some of the quarters may change due to the restatement,
working capital accounts are also being restated. This results in no
effect to the cash generated throughout the period.
8. What are the revised quarterly results?
The numbers in the press release are very recent and we have not yet
computed the restated quarterly numbers. We will have the restated
quarterly numbers by the time we announce our fourth quarter earnings
at the end of June.
9. The press release mentioned deferred delivery sales. What does that
mean?
Deferred delivery sales are sales that are recognized before a product
is shipped. At UAP, deferred delivery sales occurred when customers
contracted for crop inputs that they would receive at a later date.
This is consistent with generally accepted accounting principles,
provided that certain revenue recognition criteria are met.
Generally, a company recognizes sales revenue when title passes and the
product is delivered to a customer. In most cases, a customer buys a
product and walks out of the store with it, and there's no issue about
the timing of revenue recognition. However, sometimes a customer may
not be ready to take delivery of the product. The customer may not have
sufficient space for inventory, or may not want to receive the product
until ready to use it. In those situations, the selling company may
"bill and hold" the product sale and recognize revenue prior to
delivery of the product if certain accounting requirements are met,
such as passing risk of ownership to the buyer, segregating the sold
product from the seller's other inventory and having a fixed delivery
schedule.
10. How will 2001 financial results be affected by the expected
adjustments?
Reported sales and profits in fiscal 2001 will increase in 2001 as a
result of the expected adjustments. The increases are due to the
changes in timing of revenue and profit recognition and the timing of
bad debt expense recognition. Certain revenue and profit previously
reported in fiscal 2000 will now be reported in fiscal 2001; and
certain bad debt write-offs previously taken and reported in fiscal
2001 will be reflected in fiscal 1998, 1999 and 2000.
For clarity, the change in accounting practice effective in fiscal 2001
means that UAP will book revenue and/or deferred delivery sales
transactions upon transfer of title and shipment of product. This is
consistent with our review of SAB 101 and will avoid future compliance
issues with deferred delivery accounting requirements. Accordingly, any
deferred delivery business conducted in the fourth quarter of fiscal
2001 will not be recognized until delivery in fiscal 2002.
11. When will the adjusted financial results for fiscal year ended May 27,
2001 be available?
We expect to announce total company results for fiscal year ended May
27, 2001 during the last week of June. Following June 2001, revised
financial statements for fiscal 1998 through 2000 and related auditors
reports will be issued.
12. Have you taken any personnel actions regarding responsible persons at
UAP?
The Company's investigation of this matter is ongoing and we cannot
give you any specific information today concerning the responsibility
of, or actions taken or to be taken with respect to any individual;
however, appropriate corrective actions will be taken and those who are
responsible will be disciplined or dismissed. A new UAP chief operating
officer was appointed in August 2000 and a new UAP senior financial
officer was appointed in October 2000.
13. Are the accounting changes for the EITF's that you reported you were
reviewing in your third quarter 10-Q reflected in the expected
adjustments set forth in the press release?
No, the expected restatements described in the press release do not
reflect the adoption of these pronouncements. As previously reported,
in conjunction with the adoption of the EITF pronouncements, the
Company is assessing accounting policies potentially impacted by the
new pronouncements as well as several other pending EITF issues.
14. What law firm was retained by the Audit Committee as outside counsel?
Gibson, Dunn & Crutcher LLP.