FOR IMMEDIATE RELEASE
CONAGRA FOODS REPORTS FIRST-QUARTER RESULTS,
EXPECTS SOLID EARNINGS PERFORMANCE FOR FISCAL 2004
FIRST Quarter 2004
Highlights (versus a year ago):
o EPS = $0.37 vs. $0.43 last year.
>> Several items affect year-over-year comparisons:
o Prior year includes $0.05 per diluted share of earnings from
businesses the company no longer owns and the impact of an
accounting change.
o Current year includes $0.07 per diluted share of earnings,
reflecting the net effect of tax matters, legal settlements, and
an accounting change.
>> Current quarter results reflect growth in Agricultural Products
earnings, improved interest expense, and lower first quarter profits
for Packaged Foods and Food Ingredients.
>> Earnings from discontinued chicken operations were $0.01 per diluted
share lower in the current year than in the prior year. The company
expects to complete the divestiture of its chicken business in the
second fiscal quarter.
OMAHA, Neb., Sept. 18, 2003--Today ConAgra Foods, Inc. (NYSE: CAG), one of
America's leading packaged food companies, reported first quarter diluted EPS of
$0.37 for the quarter ended Aug. 24, 2003, compared with $0.43 last fiscal year.
As expected, the company's first-quarter sales and EPS were below last year,
reflecting strategic divestitures completed during fiscal 2003. Sales were $4.4
billion compared with $6.6 billion last year, following the divestiture of the
fresh beef, pork, canned seafood, and cheese businesses. Net income was $195
million compared with $228 million last fiscal year.
Bruce Rohde, chairman and chief executive officer, commented, "We've made a
significant and deliberate transformation of our portfolio to have a
higher-quality mix of businesses. Our first quarter is typically one of the
lightest of our fiscal year, and, because of that and divestitures, we planned
for this fiscal year's first-quarter sales and earnings to be below last year's.
However, with our improved business mix, we expect a solid earnings performance
for the full fiscal year. We have focused our resources on profit-enhancing
initiatives in the areas of brand building, sales and marketing execution,
customer service capabilities, and cost-savings programs. Our businesses have
identified and are aggressively pursuing cost-saving opportunities to reduce
complexity, improve efficiency, and drive solid earnings performance. The target
is improved overall margins, better returns on invested capital, and a solid
earnings performance this fiscal year and next."
Packaged Foods
Packaged Foods segment sales were $2.7 billion, compared with $2.9 billion last
year. The year-over-year sales decrease reflects the divestiture of the canned
seafood and cheese processing operations. During the quarter, sales grew for
many key categories and brands, including frozen meals (Banquet, Healthy Choice,
and Kid Cuisine), canned pasta (Chef Boyardee), tomato products (Hunt's),
whipped toppings (Reddi-wip), cooking spray (PAM), dinner kits (Banquet
Homestyle Bakes), liquid eggs (Egg Beaters), meat snacks (Slim Jim and
Pemmican), chili (Wolf), oil (Wesson), sausages (Eckrich and Brown 'N Serve),
and others. Some brands that did not post sales gains for the quarter include
Armour, Blue Bonnet, Butterball, Marie Callender's, Orville Redenbacher's, and
Van Camp's. The company is particularly encouraged by favorable results for some
of its large frozen brands. During the quarter, the company invested in new
branded retail products in frozen meals, shelf-stable meals, snacks, and dessert
categories as part of a plan to fuel profitable future growth. Overall sales for
the company's foodservice operations declined slightly for the quarter,
primarily in processed and specialty meats, but some key product lines showed
sales growth and the industry is showing positive signs in certain segments.
Volumes for deli customers grew while volumes for retail and foodservice
customers declined. Marketing mix improved during the quarter as part of an
ongoing program to target a greater percentage of marketing resources toward
consumer connections and usage.
Overall segment operating profit declined to $284 million from $353 million.
Operating profit and margins reflect overall volume declines and unfavorable
mix. The Packaged Foods segment will continue to focus its resources on brand
building, product mix, customer service, and productivity initiatives as part of
its ongoing plan to grow Packaged Foods sales and profits and expand margins.
Food Ingredients
During the quarter, sales for the Food Ingredients segment were $574 million
compared with $591 million last year. Sales results reflect higher flour prices
which were more than offset by expected lower volumes for some basic ingredients
operations. Operating profits declined to $31 million, reflecting higher input
costs for the flour business and lower profits for some merchandising
operations.
Agricultural Products
During the first quarter, operating profits for the Agricultural Products
segment increased to $58 million compared with $39 million in the prior year,
reflecting improved customer and product mix and effective cost management.
Sales were $1.1 billion, down slightly as part of a plan to improve customer
mix. The company's Agricultural Products segment consists of results for UAP
(United Agri Products), which distributes crop inputs to the grower community.
Interest, Corporate Expense, Depreciation & Capital Expenditures From Continuing
Operations
Net interest expense for the quarter was $66 million compared with $84 million
the prior year. Capital expenditures totaled $78 million compared with $91
million last year. Depreciation and amortization expense was approximately $91
million for the quarter versus $108 million a year ago. Dividends paid were $131
million compared with $124 million. Corporate expense was $92 million compared
with $67 million last year - the increase largely reflects the resolution of
litigation described below.
Rohde concluded, "We have been progressively reshaping the company toward a
richer business mix and building customer-focused resources. Our goal is to
become America's Favorite Food Company with a portfolio of favorite products for
grocery, restaurant, and ingredient customers, supported by superior customer
service capabilities. We continue to make important changes to our portfolio of
businesses so that all of our resources are strategically aligned with our goals
to profitably and efficiently serve customers. We look forward to reporting on
our progress."
Items Affecting Year-Over-Year Comparability of Results
Items in the first quarter of fiscal 2003 that are not repeated in first quarter
of fiscal 2004:
o Prior year results include $0.05 per diluted share of earnings from
businesses the company no longer owns and the impact of an accounting
change.
o The results for the first quarter of the company's last fiscal
year included approximately $0.04 per diluted share of earnings
due to businesses the company no longer owns-fresh beef and pork
(divested September 2002), canned seafood (divested May 2003),
and cheese (divested May 2003), and also included $0.01 per
diluted share of earnings from a change in accounting relating to
the required adoption of SFAS 142, which deals with intangibles.
Included in the results for the first quarter of fiscal 2004:
o Current year results include net $0.07 per diluted share of earnings,
reflecting tax matters, legal settlements, and an accounting change
relating to SFAS 143, which deals with asset retirement obligations.
o The results for the first quarter of fiscal 2004 included
approximately $0.02 per diluted share of expense from the
cumulative effect of a change in accounting related to the
required adoption of SFAS 143, which deals with asset retirement
obligations.
o The results for the first quarter of fiscal 2004 include
approximately $0.03 per diluted share of litigation expense
related to a choline cloride joint venture with DuPont that was
sold in 1997. That expense is reported as part of the corporate
expense and is not part of the operating segment results.
o The results for the first fiscal quarter of 2004 include
approximately $0.12 per diluted share of earnings related to tax
matters. Recently, the company closed out some interest rate
swaps put in place as part of a strategy to hedge interest costs
associated with long-term debt. As a result, the company's
effective tax rate for the quarter was reduced, as the company on
a go-forward basis will utilize capital loss carry-forwards
generated from the business disposition process. The quarterly
benefit from tax matters also includes amounts related to
finalizing IRS audits of the company's federal tax returns. The
overall quarterly benefit from tax matters results in an
effective tax rate of approximately 9% for the quarter. This is
substantially lower than the 38% effective tax rate expected for
the remainder of the fiscal year.
Discontinued Operations
During the quarter, earnings from discontinued chicken operations were $0.01 per
diluted share lower than in the same quarter last year, reflecting market
conditions. The company expects to complete the sale of its chicken business to
Pilgrim's Pride Corp. in the second fiscal quarter.
Reclassification
During the quarter, the bulk fertilizer business was moved from the Agricultural
Products segment to the Food Ingredients segment because that business fits with
and is managed with the company's other basic inputs operations. Historical
segment results have been changed to reflect this and are available in the
question-and-answer document relating to this release on the company's Web site
at www.conagrafoods.com under the section for Investors.
ConAgra Foods, Inc., (NYSE: CAG) is one of North America's leading packaged food
companies, serving consumer grocery retailers, as well as restaurants and other
foodservice establishments. Popular ConAgra Foods consumer brands include: ACT
II, Armour, Banquet, Blue Bonnet, Butterball, Chef Boyardee, Cook's, Eckrich,
Gulden's, Healthy Choice, Hebrew National, Hunt's, Kid Cuisine, Knott's Berry
Farm, La Choy, Louis Kemp, Marie Callender's, Orville Redenbacher's, Parkay,
Reddi-wip, Slim Jim, PAM, Pemmican, Peter Pan, Snack Pack, Swiss Miss, Van
Camp's, Wesson, and many others. For more information, please visit us at
www.conagrafoods.com.
Discussion of Results
A discussion of ConAgra Foods' first quarter results by Bruce Rohde, chairman
and chief executive officer, Jim O'Donnell, executive vice president and chief
financial officer, and Chris Klinefelter, vice president of investor relations,
will be available today at 8:30 a.m. EDT. To access the discussion, call
toll-free at 1-877-447-8217. International callers should dial 1-706-679-0415.
On the Internet you may access the discussion at
http://www.conagrafoods.com/investors No passcode or call identification number
is needed for the call at 8:30 a.m. EDT. A digital replay of the discussion will
be available after 9:30 a.m. EDT at 1-800-642-1687 and at 1-706-645-9291 for
international callers. The conference identification number for the digital
replay for domestic and international callers is 1782217. The company has posted
question-and-answer information relating to this release and an audio archive of
management's discussion at http://www.conagrafoods.com/investors. See ConAgra
Foods' Web site for recent news at http://www.conagrafoods.com.
Note on Forward-Looking Statements:
This news release contains "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are based
on management's current expectations and are subject to uncertainty and changes
in circumstances. Actual results may vary materially from the expectations
contained in the forward-looking statements. Future economic circumstances,
industry conditions, company performance and financial results, availability and
prices of raw materials, product pricing, competitive environment and related
market conditions, operating efficiencies, access to capital, actions of
governments and regulatory factors affecting the company's businesses and other
risks described in the company's reports filed with the Securities and Exchange
Commission are examples of factors, among others, that could cause actual
results to differ materially from those described in the forward-looking
statements. The company is under no obligation to (and expressly disclaims any
such obligation to) update or alter its forward-looking statements whether as a
result of new information, future events or otherwise.
ConAgra Foods, Inc.
Segment Operating Results
In millions FIRST QUARTER - 13 Weeks Ended
------------------------------
August 24, 2003 August 25, 2002 Percent Change
--------------- --------------- -------
SALES
Packaged Foods $2,721.4 $2,889.0 (5.8)%
Food Ingredients 574.2 590.7 (2.8)%
Agricultural Products 1,098.1 1,111.8 (1.2)%
Meat Processing - 1,962.3 (100.0)%
------- --------
Total 4,393.7 6,553.8 (33.0)%
------- -------- -------
OPERATING PROFIT
Packaged Foods $284.0 $353.1 (19.6)%
Food Ingredients 30.7 38.6 (20.5)%
Agricultural Products 58.3 38.6 51.0%
Meat Processing - 46.2 (100.0)%
---- ------
Total operating profit 373.0 476.5 (21.7)%
for segments
Reconciliation of total operating profit to income from continuing operations
before income tax and cumulative effect of changes in accounting
Items excluded from segment operating profit:
General corporate expense 92.2 67.2 37.2%
Interest expense, net 65.7 83.5 (21.3)%
Equity method investment 9.5 7.8 21.8%
earnings --- ---
Income from continuing
operations before income tax
and cumulative effect of $224.6 $333.6 (32.7)%
changes in accounting ====== ======
Segment operating profit excludes general corporate expense, equity method
investment earnings and net interest expense. Management believes such expenses
are not directly associated with segment performance results for the period.
Management believes the presentation of total operating profit for segments
facilitates period-to-period comparison of results of segment operations.
ConAgra Foods, Inc.
Consolidated Statement of Earnings
In millions, except per share amounts
FIRST QUARTER - 13 Weeks Ended
August 24, 2003 August 25, 2002 Percent
Change
Net sales $4,393.7 $6,553.8 (33.0)%
-------- --------
Costs and expenses
Cost of goods sold 3,543.1 5,575.2 (36.4)%
Selling, general and 569.8 569.3 0.1%
administrative expenses
Interest expense, net 65.7 83.5 (21.3)%
----------- -----------
4,178.6 6,228.0 (32.9)%
Equity method investment earnings 9.5 7.8 21.8%
--- ---
Income from continuing operations before
income tax and cumulative effect
of changes in accounting 224.6 333.6 (32.7)%
Income taxes 20.9 123.0 (83.0)%
--------------- ----------------
Income from continuing operations 203.7 210.6 (3.3)%
before cumulative effect of changes
in accounting
Income from discontinued operations 2.9 13.1 (77.9)%
--- ----
Income before cumulative effect of 206.6 223.7 (7.6)%
changesin accounting
Cumulative effect of changes (11.7) 3.9 N/A
in accounting ------ ---
Net Income $ 194.9 $ 227.6 (14.4)%
======= =======
Income per share - basic
Income from continuing operations $0.38 $0.40 (5.0)%
Income from discontinued operations 0.01 0.02 (50.0)%
Cumulative effect of changes in (0.02) 0.01 N/A
accounting ------ ----
Net income $0.37 $0.43 (14.0)%
===== =====
Weighted average shares outstanding 530.0 527.7 0.4%
===== =====
Income per share - diluted
Income from continuing operations $0.38 $0.40 (5.0)%
Income from discontinued operations 0.01 0.02 (50.0)%
Cumulative effect of changes in (0.02) 0.01 N/A
accounting ------ ----
Net income $0.37 $0.43 (14.0)%
===== =====
Weighted average shares and share
equivalents outstanding 531.5 530.5 0.2%
===== =====
ConAgra Foods, Inc.
Consolidated Balance Sheets
In millions
ASSETS
August 24, 2003 August 25, 2002
Current assets
Cash and cash equivalents $ 680.7 $ 17.4
Receivables, less allowance for
doubtful accounts of $89.4 1,571.3 1,910.6
and $111.0
Inventories 3,443.1 4,472.8
Prepaid and other current assets 562.5 666.6
Current assets from discontinued 316.1 372.0
operations ----- -----
Total current assets 6,573.7 7,439.4
Property, plant and equipment, net 2,794.5 3,415.5
Goodwill 3,830.5 3,906.8
Brands, trademarks and other intangibles, 833.5 878.9
net
Other assets 1,149.7 431.4
Non-current assets from discontinued 357.3 472.0
operations ----- -----
Total assets $15,539.2 $16,544.0
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 161.9 $1,229.8
Current installments of long-term debt 520.4 208.5
Accounts payable 1,616.2 1,537.0
Advances on sales 180.4 180.4
Other accrued liabilities 1,740.4 1,690.9
Current liabilities from discontinued 149.6 142.8
operations ----- -----
Total current liabilities 4,368.9 4,989.4
Senior long-term debt, excluding 4,525.9 5,055.9
current installments
Other non-current liabilities 950.6 1,057.4
Non-current liabilities from 16.8 31.8
discontinued operations
Subordinated debt 758.4 760.9
Preferred securities of a subsidiary 175.0 175.0
company
Common stockholders' equity 4,743.6 4,473.6
------- -------
Total liabilities and stockholders'$15,539.2 $16,544.0
equity ========= =========