FOR IMMEDIATE RELEASE
CONAGRA FOODS REPORTS STRONG FIRST QUARTER SALES WITH SOLID PROFITS; SHARE
REPURCHASES CONTINUED DURING THE QUARTER
HIGHLIGHTS:
- -----------
o First quarter fiscal 2005 sales rose 8% to $3.5 billion, driven mostly by
strong volume performance in the Retail Products segment.
o First quarter fiscal 2005 diluted EPS of $0.26 includes $0.02 per share of
previously announced costs related to implementing efficiency initiatives.
o First quarter fiscal 2004 diluted EPS of $0.37 included contribution from
businesses the company no longer owns and other items affecting
year-over-year comparisons. Those items are detailed toward the end of this
release.
o Almost seven million shares were repurchased during the first quarter of
fiscal 2005 for approximately $181 million.
OMAHA, Neb., Sept. 22, 2004 -- ConAgra Foods Inc. (NYSE: CAG), one of North
America's leading packaged food companies, today reported earnings for the first
quarter ended Aug. 29, 2004. Net income for the quarter was $135 million, or
$0.26 per diluted share, and includes $0.02 per share of previously announced
costs related to implementing efficiency initiatives. Earnings for the first
quarter last year were $195 million, or $0.37 per diluted share, reflecting
contribution from businesses the company no longer owns, as well as other items
that impact year-over-year comparability.
Sales for the company increased 8% to $3.5 billion from $3.2 billion last year.
Current quarter operating profit was $341 million, 9% above the $312 million
reported last year. Current quarter income from continuing operations before
income tax and the cumulative effect of changes in accounting was $214 million,
29% ahead of $166 million last fiscal year.
Bruce Rohde, chairman and chief executive officer, commented, "Our first quarter
sales were very strong, reflecting excellent volumes for many of our brands. Our
sales and marketing initiatives are gaining significant momentum, and we are
pleased with the progress."
Rohde continued, "And because we have taken some price increases and reduced
operating expenses in several areas, our overall operating profit this quarter
was solid, but it was not as strong as we wanted; this was mainly due to
significantly increased input costs across the industry. As we plan for the
balance of this fiscal year, we expect to continue making price adjustments to
offset increased input costs, as well as to continue growing volumes and
capitalizing on cost savings opportunities so that we strengthen margins
throughout the year."
Retail Products (58% of total sales)
Sales for the Retail Products segment increased 9% to $2 billion, the result of
8% volume growth.
o Brands posting sales gains include: ACT II, Armour, Banquet, Blue Bonnet,
Butterball, Chef Boyardee, Cook's, DAVID, Eckrich, Egg Beaters, Hebrew
National, Hunt's, Kid Cuisine, Manwich, Marie Callender's, PAM, Parkay,
Peter Pan, Reddi-wip, Swiss Miss, and Wesson; many of these increased at
double-digit rates.
o Sales for the company's top 30 brands as a group, which represent almost
80% of total segment sales, grew 9%; category share trends for many of the
company's most significant brands showed solid year-over-year improvement.
The strong volume performance reflects disciplined sales and marketing
initiatives designed to continually strengthen brand equities, increase category
shares, expand distribution, optimize return on marketing investment, and
improve profit contribution from new items. The company notes that segment
volume performance in the first quarter last fiscal year was soft, reflecting
the consolidation of the Retail Products sales force underway at that time. This
consolidation, now complete, reduced the role of brokers and resulted in a
direct approach for serving customers. That transition has resulted in improved
sales execution, which contributed to the strong volume performance this
quarter. During the quarter, the segment's selling prices increased slightly,
which only partly offset higher input costs; additional price increases continue
to be implemented to address increased raw material costs.
The Retail Products segment operating profit for the quarter was $213 million,
3% above the $208 million posted last year, reflecting the strong volume
performance and a focus on operating cost reduction in the face of increased
input costs. Significantly increased input costs negatively impacted operating
profit growth and profit margin, as did $8 million of costs associated with
implementing efficiency initiatives. Profits for branded processed meats were
significantly below prior year results, reflecting a combination of increased
costs and competitive challenges. The company expects price increases as well as
the marketing and operating initiatives underway to accelerate the rate of
operating profit growth for this segment as the fiscal year progresses.
Foodservice Products (26% of total sales)
Sales for the Foodservice Products segment were $905 million for the first
quarter, an increase of 3% over last year, reflecting price increases that
offset increased input costs. Sales for specialty potato and culinary products
grew, while seafood sales declined due to market conditions. Segment operating
profit for the quarter was $67 million, 11% below the $76 million posted last
year, largely due to $11 million of unfavorable production costs associated with
a planned plant consolidation. Results also include $5 million of costs
associated with implementing efficiency initiatives. The company expects price
increases as well as the marketing and operating initiatives underway to
accelerate the rate of operating profit growth for this segment as the fiscal
year progresses.
Food Ingredients (16% of total sales)
During the quarter, sales for the Food Ingredients segment increased 14% to $577
million from $508 million last year. Operating profit more than doubled to $60
million this year. The strong sales and operating profit increases are primarily
the result of a favorable environment for input merchandising operations. Sales
and operating profit results for the value-added specialty ingredients product
lines were essentially equal to those of a year ago.
Earnings from Equity Method Investments
Equity method investment earnings for the quarter were $14 million, compared
with $11 million for the same quarter last year.
Capital Resource Management & Corporate Expense
o The company repurchased nearly seven million shares of common stock during
the first quarter at a total cost of approximately $181 million. Since
announcing a $1 billion share repurchase program in December 2003, the
company has repurchased approximately 22 million shares for a total cost of
approximately $600 million.
o Capital expenditures for property, plant, and equipment totaled $105
million compared with $71 million last year; the increase over last year
reflects additional investment in information systems. Depreciation and
amortization expense was approximately $89 million for the quarter versus
$85 million a year ago. Dividends paid totaled $135 million. Net interest
expense for the quarter was $73 million compared with $65 million last
year.
o Corporate expense was $67 million for the quarter, compared with $92
million last year. Prior year amounts include approximately $22 million
related to a litigation settlement.
New Product News
During the quarter the company announced its whole-grain flour, Ultragrain White
Whole Wheat, its proprietary product that the company expects to be
revolutionary in the baking industry. Ultragrain combines the nutritional
benefits of whole grains with the taste, texture, and finished-baked qualities
of refined flour that consumers and bakers often prefer. Ultragrain can be used
in many applications including: bread, pizza crusts, pastas, tortillas, snacks,
and cereals among other uses. Initial inquiries from potential trade customers
including food manufacturers, bakeries, and ingredients companies suggest that
the product has significant potential.
Also during the quarter, Banquet Crock-Pot Classics, the first complete meal
designed and created for Crock-Pot slow cooking, reached nationwide
distribution, and is off to strong start. Banquet Crock-Pot Classics contain all
of the high-quality ingredients needed for a slow-cooked meal--like tender
meats, fresh vegetables, hearty potatoes, and perfectly seasoned sauces--and are
ready to cook with less than five minutes of preparation, providing consumers
with a convenient, on-demand homemade family meal.
Outlook
The company believes that the marketing and operating initiatives currently
being implemented, along with appropriate price increases, and the share
repurchase program, will drive a solid EPS performance this fiscal year; the
company expects the benefit of its profit-enhancing initiatives and pricing
actions to be more apparent in the company's profit margins (profit as a
percentage of sales) during the second half of the fiscal year than in the first
half.
For more detail on the company's financial goals, please refer to the company's
Web site, www.conagrafoods.com/investors, and choose the button titled
"ConAgra Foods Comments on Strategic Direction."
Major Items Affecting Year-Over-Year EPS Comparability of First-Quarter 2005
Results
Included in the $0.26 diluted EPS for the first quarter of fiscal 2005:
o Current quarter results include expense of approximately $0.02 per diluted
share related to implementing cost-saving initiatives.
o Current quarter results do not include any significant contribution from
operations now classified as discontinued.
Included in the $0.37 diluted EPS for the first quarter of fiscal 2004:
o Prior year results include a tax-related benefit of $0.12 per diluted
share.
o Prior year results include $0.07 per diluted share of income from
discontinued operations.
o Prior year results include approximately $0.03 per diluted share of
litigation expense, which was classified as a corporate SG&A expense.
o Prior year results include $0.02 per diluted share of expense from the
cumulative effect of an accounting change relating to the adoption of SFAS
143.
ConAgra Foods Inc. (NYSE: CAG) is one of North America's largest 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, Brown 'N Serve, Butterball, Chef Boyardee,
Cook's, Crunch 'n Munch, DAVID, Decker, Eckrich, Egg Beaters, Fleischmann's,
Golden Cuisine, Gulden's, Healthy Choice, Hebrew National, Hunt's, Kid Cuisine,
Knott's Berry Farm, La Choy, Lamb Weston, Libby's, Life Choice, Lightlife, Lunch
Makers, MaMa Rosa's, Manwich, Marie Callender's, Orville Redenbacher's, PAM,
Parkay, Pemmican, Peter Pan, Reddi-wip, Rosarita, Ro*Tel, Slim Jim, Snack Pack,
Swiss Miss, Van Camp's, Wesson, Wolf, and many others. For more information,
please visit us at www.conagrafoods.com.
Discussion of Results
A discussion of ConAgra Foods' first quarter results 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 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 callers and international callers is
9483317. The company has posted a question-and-answer supplement relating to
this release and an audio archive of management's discussion at
www.conagrafoods.com/investors. See the ConAgra Foods Web site for recent
news at 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 views and assumptions of future events and financial
performance and are subject to uncertainty and changes in circumstances. Readers
of this release should understand that these statements are not guarantees of
performance or results. Many factors could affect the company's actual financial
results and cause them to vary materially from the expectations contained in the
forward-looking statements. These factors include, among other things, 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. The company cautions readers not to place
undue reliance on any forward-looking statements included in this release, which
speak only as of the date made.
ConAgra Foods, Inc.
Segment Operating Results
Dollars in millions
FIRST QUARTER
-------------------------------------------------------------
13 Weeks 13 Weeks
Ended Ended
-------------------- ------------------- ------------------
August 29, August 24, Percent Change
2004 2003
-------------------- ------------------- ------------------
SALES
Retail Products $ 2,014.2 $ 1,841.0 9.4%
Foodservice Products 904.6 880.3 2.8%
Food Ingredients 576.8 508.1 13.5%
-------------------- -------------------
Total 3,495.6 3,229.4 8.2%
-------------------- -------------------
OPERATING PROFIT
Retail Products $ 213.3 $ 208.0 2.5%
Foodservice Products 67.4 76.0 (11.3)%
Food Ingredients 60.1 27.9 115.4%
-------------------- -------------------
Total operating profit for segments 340.8 311.9 9.3%
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 67.1 91.7 (26.8)%
Interest expense, net 73.4 65.4 12.2%
Equity method investment earnings 14.1 11.2 25.9%
-------------------- -------------------
Income from continuing operations before income tax and
cumulative effect of changes in accounting $ 214.4 $ 166.0 29.2%
==================== ===================
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 Statements of Earnings
In millions, except per share amounts
FIRST QUARTER
---------------------------------------------------------------
13 Weeks Ended 13 Weeks Ended
------------------- ------------------- -------------------
August 29, August 24, Percent Change
2004 2003
------------------- ------------------- -------------------
Net sales $ 3,495.6 $ 3,229.4 8.2%
Costs and expenses:
Cost of goods sold 2,807.4 2,545.2 10.3%
Selling, general and administrative expenses 414.5 464.0 (10.7)%
Interest expense, net 73.4 65.4 12.2%
------------------- -------------------
3,295.3 3,074.6 7.2%
Equity method investment earnings 14.1 11.2 25.9%
------------------- -------------------
Income from continuing operations before income taxes
and cumulative effect of changes in accounting 214.4 166.0 29.2%
Income tax expense (benefit) 81.1 (1.3) N/A
------------------- -------------------
Income from continuing operations before
cumulative effect of changes in accounting 133.3 167.3 (20.3)%
Income from discontinued operations, net of tax 1.7 39.3 (95.7)%
Cumulative effect of changes in accounting, net of tax - (11.7) (100.0)%
------------------- -------------------
Net income $ 135.0 $ 194.9 (30.7)%
=================== ===================
Earnings per share - basic
Income from continuing operations before
cumulative effect of changes in accounting $ 0.26 $ 0.32 (18.8)%
Income from discontinued operations - 0.07 (100.0)%
Cumulative effect of changes in accounting - (0.02) 100.0%
------------------- -------------------
Net income $ 0.26 $ 0.37 (29.7)%
=================== ===================
Weighted average shares outstanding 517.0 530.0 (2.5)%
=================== ===================
Earnings per share - diluted
Income from continuing operations before
cumulative effect of changes in accounting $ 0.26 $ 0.32 (18.8)%
Income from discontinued operations - 0.07 (100.0)%
Cumulative effect of changes in accounting - (0.02) 100.0%
------------------- -------------------
Net income $ 0.26 $ 0.37 (29.7)%
=================== ===================
Weighted average share and share equivalents
outstanding 521.4 531.5 (1.9)%
=================== ===================
ConAgra Foods, Inc.
Consolidated Balance Sheets
Dollars in millions
August 29, 2004 August 24, 2003
--------------------- --------------------
ASSETS
Current assets
Cash and cash equivalents $ 369.8 $ 722.0
Receivables, less allowance for doubtful accounts
of $28.5 and $32.3 1,349.7 807.5
Inventories 2,640.3 2,542.6
Prepaid expenses and other current assets 368.2 524.9
Current assets of discontinued operations 175.4 1,976.7
--------------------- --------------------
Total current assets 4,903.4 6,573.7
Property, plant and equipment, net 2,906.2 2,649.9
Goodwill 3,801.4 3,802.4
Brands, trademarks and other intangibles, net 826.4 823.5
Other assets 1,575.0 1,137.0
Noncurrent assets of discontinued operations 9.4 552.7
--------------------- --------------------
$ 14,021.8 $ 15,539.2
===================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 22.4 $ 134.1
Current installments of long-term debt 366.9 520.4
Accounts payable 873.5 849.1
Advances on sales 103.0 113.0
Other accrued liabilities 1,423.3 1,559.4
Current liabilities of discontinued operations 164.9 1,192.8
--------------------- --------------------
Total current liabilities 2,954.0 4,368.8
Senior long-term debt, excluding current installments 4,887.1 4,526.0
Subordinated debt 400.3 758.4
Preferred securities of subsidiary company - 175.0
Other noncurrent liabilities 1,120.0 950.2
Noncurrent liabilities of discontinued operations - 17.2
Common stockholders' equity 4,660.4 4,743.6
--------------------- --------------------
$ 14,021.8 $ 15,539.2
===================== ====================