Q&A: Q1 FY2004
1. What are the major items affecting the comparability of Q1 FY04 diluted EPS
of $0.37 with the Q1 FY03 diluted EPS of $0.43?
Fiscal 2004 First Quarter EPS $0.37
Items Included in 2004 First Quarter EPS:
Tax related benefit $0.12
Increase in litigation reserve ($0.03)
Expense related to adopting SFAS 143 ($0.02)
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Net Impact on Quarter $0.07
Fiscal 2003 First Quarter EPS $0.43
Items Included in 2003 First Quarter EPS:
Profits from businesses since divested $0.04
Benefit related to adopting SFAS 142 $0.01
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Net Impact on Quarter $0.05
2. What were the sales and volume changes for the Packaged Foods segment for
the quarter, excluding divested businesses?
Year-over-year, Packaged Foods sales were down $168 million - that
difference is mostly due to divestitures.
Volume was down 5%, reflecting mix and pricing changes.
3. In terms of sales, what were some of the key categories and major brands
that posted growth?
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
Dinner Sausage: Eckrich
Breakfast Sausage: Brown 'N Serve
4. In terms of sales, what were some of the large brands that posted declines?
Armour
Blue Bonnet
Butterball
Marie Callender's
Orville Redenbacher's
Van Camp's
5. How much was total Depreciation and Amortization (all types) for the
quarter? Note: These amounts do not contain results for chicken operations,
which are now considered discontinued operations.
Approximately $91 million (vs. $108 million in Q1 2003).
$90 million of depreciation (vs. $106 million in Q1 2003)
$1 million of other amort. (vs. $2 million in Q1 2003)
6. How much were Capital Expenditures during the quarter? Note: These amounts
do not contain results for chicken operations*, which are now considered
discontinued operations.
Approximately $78 million (vs. $91 million in Q1 2003).
* Capital Expenditures for the chicken business were approximately $9
million in the quarter (vs. $6 million in Q1 2003).
7. What was the net interest expense for the quarter?
$66 million.
8. What is included in the company's net debt at the end of the quarter (in
millions)?
Q1FY04 Q1FY03
Total Debt* & Preferred Securities $6,142 $7,430
Less: Cash On Hand $ 681 $ 17
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Total $5,461 $7,413
* Total debt = short-term debt, long-term debt, and subordinated debt
9. What was Corporate Expense for the quarter?
$92 million (vs. $67 million in Q1 2003).
10. What was the main factor driving the increase in Corporate Expense for the
quarter?
The increase largely reflects litigation expense related to a chloine
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.
11. How much did you pay in dividends during the quarter?
$131 million.
12. What was the weighted average number of diluted shares outstanding for the
quarter?
531.5 million shares.
13. What was the approximate effective tax rate for the quarter (rounded)?
9%
14. What were the gross margins and operating margins this quarter ($ amounts
in millions, rounded)?
Gross Margin = Gross Profit* divided by Sales
Gross Margin = $851/$4,394 = 19.4%
Operating Margin = Segment Operating Profit** divided by Sales
Operating Margin = $373/$4,394 = 8.5%
* Gross Profit equals Sales - Costs of Goods Sold ($4,394 - $3,543 = $851)
** See first quarter segment operating results for a reconciliation of
operating profit to income from continuing operations before income tax and
cumulative effect of changes in accounting.
15. What was the trade working capital position at quarter end?
Trade working capital is defined as the net position of Accounts Receivable
+ Inventory less Current Operating Liabilities (Accounts Payable, Accrued
Expenses, and Advances on Sales).
Q1FY04 Q1FY03
Accounts Receivable $1,571 $1,911
Inventory $3,443 $4,473
Less: Accounts Payable $1,616 $1,537
Less: Accrued Expenses $1,740 $1,691
Less: Advances on Sales $ 180 $ 180
Net Position $1,478 $2,976
16. What is the estimate of the effective tax rate for the remaining quarters
of fiscal 2004?
Approximately 38%.
17. What are projected Capital Expenditures for fiscal 2004?
$420 million.
18. What is the expected net interest expense for fiscal 2004?
Approximately $260 million.
19. You mentioned that you liquidated interest rate swaps recently. How does
that alter your short-term earnings outlook?
o We use swaps as part of a strategy to hedge against interest rate
risk.
o We entered some swaps approximately 2 years ago when, for strategic
reasons, we converted some short-term debt to long-term debt.
o Recently we liquidated those swaps and, as a result, locked in
interest rates on some debt instruments.
o The income statement impact of the benefit of the swaps is a reduction
of interest expense, and has already been anticipated in our interest
expense estimate of $260 million for fiscal 2004. Thus we have no
alteration of our short-term earnings outlook as a result of
liquidating the swaps.
o Accounting for swaps is complex. The benefit of the swaps is
recognized over the term of the debt instruments hedged. For this
reason, our interest expense in fiscal 2005 through 2008 is expected
to continue to reflect the interest rates we have locked in, and will
be reflected in our estimates for interest expense as we provide them
annually.
20. The company continues to make changes to its portfolio. Why?
The company is concentrating its capital in branded and value-added food
opportunities. This is part of an ongoing agenda to improve the strength
and consistency of earnings by focusing on businesses with higher margin
opportunities and lower volatility. Accordingly, the company divested fresh
beef and pork, canned seafood, and cheese operations. In addition, the
company reached an agreement to sell its chicken business.
21. When does the company expect to complete the sale of its chicken business?
In the second quarter of fiscal 2004.
22. Why has there been a change to historical segment classifications?
During the quarter, the bulk fertilizer business was moved from the
Agricultural Products segment to the Food Ingredients segment because that
business fits with and is managed with the company's other basic inputs
operations. Therefore, historical results have been changed to reflect this
move.
Overall current and historical diluted EPS does not change as a result of
the classification changes.
23. What are the revisions to historical segment results as a result of the
classification change that took place this quarter?
Please see the attached tables - One shows segment information, the other
shows entire P/L information.
ConAgra Foods
($USD, in Millions)
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FY 2002 FY 2003
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Q1 FY02 Q2 FY02 Q3 FY02 Q4 FY02 Total Q1 FY03 Q2 FY03 Q3 FY03 Q4 FY03 Total
Segment Sales
Packaged Foods $2,965.9 $3,310.4 $3,065.7 $3,155.3 $12,497.3 $2,889.0 $3,294.9 $3,009.3 $3,072.9 $12,266.1
Food Ingredients 576.0 598.6 608.6 551.5 2,334.7 590.7 649.5 605.0 614.3 2,459.5
Meat Processing 2,115.9 1,976.9 1,740.7 1,899.9 7,733.4 1,962.3 506.4 - - 2,468.7
Agricultural 1,409.8 972.6 376.8 318.4 3,077.6 1,111.8 1,022.0 376.9 281.5 2,792.2
Products
Total 7,067.6 6,858.5 5,791.8 5,925.1 25,643.0 6,553.8 5,472.8 3,991.2 3,968.7 19,986.5
Segment Operating Profit
Packaged Foods 317.4 414.8 421.9 436.6 1,590.7 353.1 455.9 415.5 418.0 1,642.5
Food Ingredients 50.7 55.8 62.6 31.4 200.5 38.6 48.7 31.8 17.0 136.1
Meat Processing 55.7 67.6 20.7 43.8 187.8 46.2 2.8 0.7 49.7 99.4
Agricultural 64.5 (10.0) (60.4) (31.4) (37.3) 38.6 31.0 (37.4) 14.8 47.0
Products
Total 488.3 528.2 444.8 480.4 1,941.7 476.5 538.4 410.6 499.5 1,925.0
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 and 82.3 59.9 65.6 71.5 279.3 67.2 119.8 89.8 133.7 410.5
corporate expense
Interest expense, 104.0 99.7 93.9 103.5 401.1 83.5 69.8 63.9 59.1 276.3
net
Equity method 8.2 6.5 3.5 9.0 27.2 7.8 6.8 11.4 11.9 37.9
investment earnings
Goodwill Amortization 27.2 27.8 26.4 26.7 108.1 - - - - -
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Income from continuing
operations before 283.0 $ 347.3 $ 262.4 $ 287.7 $ 1,180.4 $ 333.6 $ 355.6 $ 268.3 $ 318.6 $ 1,276.1
income tax and cumulative----------------------------------------------------------------------------------------------------------
effect of changes in accounting
Segment operating profit excludes general corporate expense, equity method
investment earnings, goodwill 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.
Income Statement for FY02 and FY03
(in millions)
Q1 FY02 Q2 FY02 Q3 FY02 Q4 FY02 Total FY 02 Q1 FY03 Q2 FY03 Q3 FY03 Q4 FY03 Total FY 03
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Net sales $7,067.6 $6,858.5 $5,791.8 $5,925.1 $ 25,643.0 $6,553.8 $5,472.8 $3,991.2 $3,968.7 $ 19,986.5
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Costs and expenses
Costs of goods sold 6,052.0 5,789.4 4,853.4 4,970.8 21,665.6 5,575.2 4,416.0 3,104.6 3,067.8 16,163.6
SG&A expenses 636.8 628.6 585.6 572.1 2,423.1 569.3 638.2 565.8 535.1 2,308.4
Interest expenses, net 104.0 99.7 93.9 103.5 401.1 83.5 69.8 63.9 59.1 276.3
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6,792.8 6,517.7 5,532.9 5,646.4 24,489.8 6,228.0 5,124.0 3,734.3 3,662.0 18,748.3
Equity method investment 8.2 6.5 3.5 9.0 27.2 7.8 6.8 11.4 11.9 37.9
earnings ----------------------------------------------------------------------------------------------------------
Income from continuing
operations before
income taxes and cumulative
effect of changes in 283.0 347.3 262.4 287.7 1,180.4 333.6 355.6 268.3 318.6 1,276.1
accounting
Income taxes 106.9 130.8 99.3 108.3 445.3 123.0 128.6 90.9 93.5 436.0
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Income from continuing 176.1 216.5 163.1 179.4 735.1 210.6 227.0 177.4 225.1 840.1
operations before
cumulative effect of
changes in accounting
Income (loss) from 14.3 15.1 7.7 12.8 49.9 13.1 8.8 (16.4) (74.7) (69.2)
discontinued operations
Income before cumulative
effect of changes in 190.4 231.6 170.8 192.2 785.0 223.7 235.8 161.0 150.4 770.9
accounting
Cumulative effect of (2.0) - - - (2.0) 3.9 - - - 3.9
changes in accounting ------------------------------------------------------------------------------------------------------
Net income $ 188.4 $ 231.6 $ 170.8 $ 192.2 $ 783.0 $ 227.6 $ 235.8 $ 161.0 $ 150.4 $ 774.8
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