FOR IMMEDIATE RELEASE NEWS RELEASE
CONAGRA FOODS REPORTS STRONG SECOND-QUARTER SALES, ALL SEGMENTS POST OPERATING
PROFIT GROWTH
SECOND-QUARTER FISCAL 2005 HIGHLIGHTS:
. Second-quarter fiscal 2005 sales rose 8% to $4.1 billion.
. Second-quarter fiscal 2005 diluted EPS was $0.47.
. All segments posted operating profit growth in the current quarter.
. One year ago, second-quarter fiscal 2004 diluted EPS of $0.51
included $0.06 per share of contribution from discontinued
operations; diluted EPS from continuing operations was $0.45.
OMAHA, Neb., Dec. 22, 2004 -- ConAgra Foods Inc. (NYSE: CAG), one of North
America's leading packaged food companies, today reported results for the fiscal
2005 second quarter, which ended Nov. 28, 2004. Sales for the quarter increased
8% to $4.1 billion. Diluted EPS from continuing operations was $0.47 for the
quarter, compared with $0.45 last year. Current quarter operating profit was
$545 million, 10% above last year, as all segments posted operating profit
growth in the current quarter. Current quarter income from continuing operations
before income tax was $390 million, 6% above last year.
Bruce Rohde, chairman and chief executive officer, commented, "The company is
tracking with its plan for solid EPS performance this fiscal year. Our sales
growth this quarter builds on last quarter's strong top-line performance and
reflects continued progress with marketing and operating initiatives being
implemented to fuel profitable growth. As expected, we continued to experience
increased input costs in several areas of our business, which we were able to
largely offset through volume gains, price adjustments, better sales and
marketing, and cost-saving initiatives. We look forward to this momentum
continuing through May, which concludes the second half of our fiscal year."
For the first six months of fiscal 2005, total sales increased 8% to $7.6
billion. Operating profit was $886 million, 9% above last year. Income from
continuing operations before income tax and cumulative effect of change in
accounting was $605 million, 13% above last year. Diluted EPS for the first half
of fiscal 2005 was $0.73, compared with $0.87 last year; several items impact
the year-over-year EPS comparison. Those items are detailed later in this
release and in the supplemental question-and-answer document relating to this
release posted on the company's Web site at www.conagrafoods.com under the
section for Investors.
Retail Products (60% of total sales)
For the quarter, sales for the Retail Products segment increased 9% to $2.5
billion, reflecting healthy volume growth of approximately 7% as well as
increased pricing necessitated by higher input costs.
.. Brands posting sales gains include: ACT II, Armour, Banquet, Blue Bonnet,
Chef Boyardee, Cook's, DAVID, Eckrich, Egg Beaters, Hunt's, Kid Cuisine, La
Choy, Marie Callender's, Orville Redenbacher's, PAM, Parkay, Peter Pan,
Reddi-wip, Snack Pack, Swiss Miss, Van Camp's, and Wesson; more than half
of these brands posted double-digit sales increases. The company notes that
major brands including Banquet, Chef Boyardee, Egg Beaters, Marie
Callender's, and PAM have posted double-digit sales growth for several
successive quarters.
.. Sales for the company's top 30 brands as a group, which represent almost
80% of total segment sales, grew 8%; many of the company's most significant
brands posted year-over-year gains in category shares, reflecting improved
execution of sales and marketing programs. The quarter's top-line
performance reflects strong sales trends across a wide range of retail
customer channels, including grocery stores, dollar stores, club stores,
and mass merchandisers.
The strong top-line performance reflects the implementation of initiatives
designed to continually strengthen brand equities, expand distribution for the
company's most promising products, and improve returns on marketing investments.
Price increases accounted for approximately 2% year-over-year sales growth. All
operations within the Retail Products segment - deli, frozen, grocery,
refrigerated, snacks, and international - showed sales growth. The company notes
particular success with Banquet(R) Crock-Pot(R) Classics(TM), which is the first
complete line of meals designed and created for slow cooking. After being
introduced only last spring, the product now has national distribution, and is
expected to generate revenue approaching $100 million for ConAgra Foods in the
first year of production.
The Retail Products segment operating profit for the quarter was $375 million,
5% above the $358 million posted last year. This growth reflects strong volume
performance, as well as price adjustments and cost-saving initiatives which
together largely offset increased input costs. Segment operating profit grew at
a slower rate than sales, reflecting increased input costs and a less favorable
mix of products sold. Lower selling, general, and administrative expenses
resulting from more efficient marketing investments and better expense
management contributed to the operating profit growth. Profits for popcorn
products and branded processed meats were below prior-year results, largely due
to category and competitive pricing challenges.
Year-to-date sales for the Retail Products segment were $4.5 billion, up 9% over
last year on volume growth of 8%. Operating profit was $589 million, 4% above
the $566 million posted last year; year-to-date results include $12 million of
costs related to implementing efficiency initiatives and prior-year amounts
include $7 million of such costs.
The company continues to streamline its purchasing, manufacturing, logistics,
and administrative functions to make operations more efficient and expects
operational improvements to result in year-over-year profitability gains for
this segment in the second half of the year.
Foodservice Products (23% of total sales)
Sales for the Foodservice Products segment were $940 million for the
second-quarter, 2% below last year, reflecting decreased seafood product sales
and the fact that prior-year amounts included $10 million of sales from
businesses the company no longer owns. Sales for specialty potato products were
strong, while seafood products sales declined due to tariff-related market
dynamics. Segment operating profit for the quarter was $91 million, 6% above the
$86 million posted last year, reflecting reduced operating expenses and, to a
lesser extent, solid sales performance with specialty potato products. For the
segment as a whole, improved mix and pricing actions offset rising input costs
during the quarter. Operating profits from seafood products and culinary
products were lower than comparable amounts a year ago. Operating profits for
seafood products declined due to tariff-related market dynamics, and operating
profits for culinary products declined mostly due to competitive challenges with
prepared meat offerings. To a lesser extent, culinary products operating profits
were also negatively impacted by unfavorable production costs resulting from a
planned plant consolidation. The company expects this segment to post
profitability gains in the second half of the year, due to operational
improvements and the fact that prior-year results included costs associated with
implementing efficiency initiatives.
Year-to-date sales for the Foodservice Products segment were $1.8 billion,
essentially equal to last year. Segment operating profit was $158 million, $4
million below the $162 million posted last year, reflecting approximately $17
million of unfavorable production costs associated with a planned plant
consolidation. In addition, current year-to-date results include $4 million of
costs related to implementing efficiency initiatives; prior-year amounts do not
include any such costs.
Food Ingredients (17% of total sales)
During the quarter, sales for the Food Ingredients segment increased 20% to $691
million from $577 million last year. Operating profit grew substantially to $79
million this year from $54 million last year. The $25 million of operating
profit increase includes growth of approximately $19 million from trading and
merchandising energy, grains, fertilizer, and other inputs and commodities;
these trading and merchandising operations are benefiting from a favorable
market environment. The segment operating profit growth also reflects strong
performance from grain-based food ingredients due to higher volumes and improved
market conditions. Difficult competitive conditions continued to negatively
impact the performance of dehydrated onion, garlic, and other vegetable
products.
The company continues to aggressively pursue new sales opportunities for
ingredients products, particularly its seasonings, blends, and flavorings items,
which have a wide range of applications in foodservice and other channels.
Year-to-date sales for the Food Ingredients segment increased 17% to $1.3
billion from $1.1 billion last year. Year-to-date operating profit was $139
million, 70% above the $82 million posted last year; and includes less than $1
million of costs related to implementing efficiency initiatives; prior-year
operating profit includes $7 million of such costs.
Earnings from Equity Method Investments
Equity method investment earnings from various investments for the quarter were
$15 million, compared with $16 million for the same quarter last year. Equity
method investment earnings for the first half of fiscal 2005 were $29 million,
compared with $28 million for the same period last year.
Corporate Expense
Corporate expense was $85 million for the quarter, compared with $79 million
last year. For the first half of the fiscal year, corporate expense was $152
million, compared with $171 million last year; the year-over-year decline
reflects approximately $25 million in the prior year for a litigation
settlement.
Capital Resource Management
.. During the quarter, ConAgra Foods sold its minority interest in Swift Foods
to Hicks, Muse, Tate & Furst for $194 million, resulting in no significant
gain or loss. ConAgra Foods no longer holds any equity position in fresh
beef and pork processing.
.. ConAgra Foods is in the process of recovering the financing it provided in
connection with Swift Foods' cattle-feeding operations. The financing,
which ConAgra Foods provided for two years, included a line of credit and a
note receivable totaling approximately $300 million at maturity. During the
quarter, the financing matured and ConAgra Foods assumed control of the
cattle-feeding assets in order to liquidate them in an orderly manner. The
feedlots have been sold, and the sale of the retained live cattle is in
process and should be completed early in calendar 2005. The company has
received $146 million from the liquidation as of the end of the
second-quarter, and, in due course, expects to fully recover all of the
cattle-feeding-related financing provided to Swift Foods.
.. On Dec. 13, ConAgra Foods sold 10 million shares of Pilgrim's Pride
Corporation (NYSE: PPC) common stock for more than $280 million, and the
resulting pretax gain of approximately $185 million will be recorded in the
third quarter of fiscal 2005. ConAgra Foods received these shares in the
fall of 2003 in connection with the divestiture of its chicken processing
operations to Pilgrim's Pride. ConAgra Foods still owns 15.4 million shares
of Pilgrim's Pride common stock that are subject to resale restrictions;
ConAgra Foods plans to sell these shares at the appropriate time in
accordance with these restrictions.
.. The company is committed to capital allocation in a way that appropriately
utilizes excess cash:
o The company has been using cash to opportunistically repurchase its
common stock. The company has repurchased approximately $600 million
of its stock over the past year.
o The company has also been using cash to retire debt that has become
due or that will soon be due:
- During the quarter, the company retired $300 million of 7.4%
subordinated debt that was due September 2004.
- Subsequent to quarter-end, the company retired $600 million
of 7.5% senior debt due September 2005.
.. For the quarter, capital expenditures for property, plant, and equipment
totaled $150 million compared with $82 million last year; the increase over
last year is due principally to additional investment to update strategic
information systems for the future. Depreciation and amortization expense
was approximately $85 million for the quarter versus $86 million a year
ago. Dividends paid totaled $134 million versus $131 million last year. Net
interest expense for the quarter was $86 million compared with $68 million
last year; current-year amounts include $14 million of additional interest
expense associated with a previously terminated interest rate swap.
.. For the first half of the fiscal year, capital expenditures for property,
plant, and equipment totaled $255 million compared with $152 million last
year; the increase over last year is due principally to additional
investment to update strategic information systems for the future.
Depreciation and amortization expense was approximately $174 million for
the first six months versus $171 million a year ago. Dividends paid totaled
$269 million for the fiscal-year-to-date versus $262 million last year. Net
interest expense for the fiscal-year-to-date was $159 million compared with
$134 million last year; the year-over-year increase is driven primarily by
the impact of interest rate swaps.
Outlook
The company expects the second half of fiscal 2005 to show year-over-year profit
growth, largely due to ongoing operational improvements.
Bruce Rohde commented, "Our team is focused on marketing, operating, and
information systems initiatives that will help expand profit margins over the
long term. These activities will help us grow our top-line while operating an
increasingly efficient supply chain that reflects low-cost manufacturing,
purchasing, and logistics operations. Our supply chain efficiency should be
further enhanced by an ongoing program that drives an increased focus on our
highest-margin, highest-opportunity items, and which phases out low-margin
items. This program should enhance our sales and profit performance as we
increase our focus on our most promising and profitable products. The potential
for these activities to favorably impact profit margins over the long term makes
this a great time to be a part of the ConAgra Foods team, and I look forward to
updating you on our progress."
For more details regarding 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
Second-Quarter EPS Comparability
Included in diluted EPS of $0.47 for the second quarter of fiscal 2005:
. Current quarter results do not include any significant contribution
from operations now classified as discontinued.
Included in diluted EPS of $0.51 for the second quarter of fiscal 2004:
. Those results include $0.06 per diluted share of income from
discontinued operations.
. Those results include expense of approximately $0.01 per diluted share
related to implementing cost-saving initiatives.
First-Quarter EPS Comparability
Included in diluted EPS of $0.26 for the first quarter of fiscal 2005:
. Those results include expense of approximately $0.02 per diluted share
related to implementing cost-saving initiatives.
. Those results do not include any significant contribution from
operations now classified as discontinued.
Included in diluted EPS of $0.37 for the first quarter of fiscal 2004:
. Those results include a tax-related benefit of $0.12 per diluted
share.
. Those results include $0.07 per diluted share of income from
discontinued operations.
. Those results include approximately $0.03 per diluted share of
litigation expense, which was classified as a corporate SG&A expense.
. Those 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 the ConAgra Foods second-quarter results will be available today
at 8:30 a.m. EST. 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. EST. A digital replay
of the discussion will be available after 9:30 a.m. EST 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
2051531. 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
In millions
SECOND QUARTER
===============================================================================================
13 Weeks 13 Weeks
Ended Ended
=============================== =============================== =============================
November 28, 2004 November 23, 2003 Percent Change
=============================== =============================== =============================
SALES
Retail Products $ 2,485.4 $ 2,271.6 9.4%
Foodservice Products 939.5 956.2 (1.7)%
Food Ingredients 691.3 577.0 19.8%
=============================== ===============================
Total 4,116.2 3,804.8 8.2%
=============================== ===============================
OPERATING PROFIT
Retail Products $ 375.2 $ 357.8 4.9%
Foodservice Products 91.0 85.8 6.1%
Food Ingredients 79.2 54.1 46.4%
=============================== ===============================
Total operating profit for 545.4 497.7 9.6%
segments
Reconciliation of total operating
profit to income from continuing
operations before income tax
Items excluded from segment
operating profit:
General corporate expense 84.6 79.1 7.0%
Interest expense, net 85.8 68.2 25.8%
Equity method investment
earnings 15.1 16.3 (7.4)%
=============================== ===============================
Income from continuing
operations before income tax $ 390.1 $ 366.7 6.4%
=============================== ===============================
=============================== ===============================
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.
</Table>
<Page>
<Table>
ConAgra Foods, Inc.
Segment Operating Results
In millions
YEAR TO DATE
===================================================================================
26 Weeks 26 Weeks
Ended Ended
========================== =========================== ==========================
November 28, 2004 November 23, 2003 Percent Chage
========================== =========================== ==========================
SALES
Retail Products $ 4,499.6 $ 4,112.6 9.4%
Foodservice Products 1,844.1 1,836.5 0.4%
Food Ingredients 1,268.1 1,085.1 16.9%
========================== ===========================
Total 7,611.8 7,034.2 8.2%
========================== ===========================
OPERATING PROFIT
Retail Products $ 588.5 $ 565.8 4.0%
Foodservice Products 158.4 161.8 (2.1)%
Food Ingredients 139.3 82.0 69.9%
========================== ===========================
Total operating profit for segments 886.2 809.6 9.5%
Reconciliation of total operating profit
to income from continuing operations
before income tax and cumulative effect of
change in accounting
Items excluded from segment operating profit:
General corporate expense 151.7 170.8 (11.2)%
Interest expense, net 159.2 133.6 19.2%
Equity method investment earning 29.2 27.5 6.2%
========================== ===========================
Income from continuing operations
before income tax and cumulative effect
of change in accounting $ 604.5 $ 532.7 13.5%
========================== ===========================
========================== ===========================
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.
</Table>
<Page>
<Table>
ConAgra Foods, Inc.
Consolidated Statementsof Earnings
In millions, except per share amounts
SECOND QUARTER
===================================================================================
13 Weeks Ended 13 Weeks Ended
======================== ======================== ========================
November 28, 2004 November 23, 2003 Percent
Change
======================== ======================== ========================
Net sales $ 4,116.2 $ 3,804.8 8.2%
Costs and expenses:
Cost of goods sold 3,213.7 2,908.5 10.5%
Selling, general and
administrative expenses 441.7 477.7 (7.5)%
Interest expense, net 85.8 68.2 25.8%
====================== =======================
3,741.2 3,454.4 8.3%
Equity method investment earnings 15.1 16.3 (7.4)%
====================== =======================
Income from continuing operations before
income taxes 390.1 366.7 6.4%
Income tax expense 146.8 128.8 14.0%
======================== =======================
Income from continuing operations 243.3 237.9 2.3%
Income (loss) from discontinued operations,
net of tax (1.0) 32.2 N/A
======================== =======================
Net income $ 242.3 $ 270.1 (10.3)%
======================== =======================
Earnings per share - basic
Income from continuing operations $ 0.47 $ 0.45 4.4%
Income from discontinued operations - 0.06 (100.0)%
======================== =======================
Net income $ 0.47 $ 0.51 (7.8)%
======================== =======================
Weighted average shares outstanding 513.7 530.7 (3.2)%
======================== =======================
Earnings per share -diluted
Income from continuing operations $ 0.47 $ 0.45 4.4%
Income from discontinued operations - 0.06 (100.0)%
======================== =======================
Net income $ 0.47 $ 0.51 (7.8)%
======================== =======================
Weighted average share and share equivalents
outstanding 517.5 531.8 (2.7)%
======================== =======================
</Table>
<Page>
ConAgra Foods, Inc.
Consolidated Statements of Earnings
In millions, except per share amounts
<Table>
YEAR TO DATE
===============================================================================
26 Weeks Ended 26 Weeks Ended
======================== ======================== =======================
November 28, 2004 November 23, 2003 Percent Change
======================== ======================== =======================
Net sales $ 7,611.8 $ 7,034.2 8.2%
Costs and expenses:
Cost of goods sold 6,021.1 5,453.7 10.4%
Selling, general and administrative expenses 856.2 941.7 (9.1)%
Interest expense, net 159.2 133.6 19.2%
======================== ========================
7,036.5 6,529.0 7.8%
Equity method investment earnings 29.2 27.5 6.2%
======================== ========================
Income from continuing operations before income
taxes and cumulative effect of change in accounting 604.5 532.7 13.5%
Income tax expense 227.9 127.5 78.7%
======================== ========================
Income from continuing operations before
cumulative effect of change in accounting 376.6 405.2 (7.1)%
Income from discontinued operations, net of tax 0.7 71.5 (99.0)%
Cumulative effect of change in accounting - (11.7) N/A
======================== ========================
Net income $ 377.3 $ 465.0 (18.9)%
======================== ========================
Earnings per share - basic
Income from continuing operations before
cumulative effect of change in accounting $ 0.73 $ 0.77 (5.2)%
Income from discontinued operations - 0.13 (100.0)%
Cumulative effect of change in accounting - ( 0.02) (100.0)%
======================== ========================
Net income $ 0.73 $ 0.88 (17.0)%
======================== ========================
Weighted average shares outstanding 515.7 530.4 (2.8)%
======================== ========================
Earnings per share - diluted
Income from continuing operations before
cumulative effect of change in accounting $ 0.73 $ 0.76 (3.9)%
Income from discontinued operations - 0.13 (100.0)%
Cumulative effect of change in accounting - (0.02) (100.0)%
======================== ========================
Net income $ 0.73 $ 0.87 (16.1)%
======================== ========================
Weighted average share and share equivalents
outstanding 519.7 531.7 (2.3)%
======================== ========================
<tABLE>
ConAgra Foods, Inc.
Consolidated Balance Sheets
In millions
November 28, 2004 November 23, 2003
======================== ========================
ASSETS
Current assets
Cash and cash equivalents $ 353.2 $ 51.9
Divestiture proceeds receivable - 865.5
Receivables, less allowance for doubtful
accounts of $30.9 and $31.8 1,536.6 1,115.4
Inventories 2,961.6 3,178.8
Prepaid expenses and other current assets 326.1 362.6
Current assets of discontinued operations 309.6 198.2
======================== ========================
Total current assets 5,487.1 5,772.4
Property, plant and equipment, net 2,967.5 2,636.2
Goodwill 3,815.0 3,807.1
Brands, trademarks and other intangibles, net 826.2 825.6
Other assets 1,101.2 1,451.5
Noncurrent assets of discontinued operations 5.1 39.9
======================== ========================
$ 14,202.1 $ 14,532.7
======================== ========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 4.4 $ 100.6
Current installments of long-term debt 766.4 324.1
Accounts payable 1,161.1 1,194.5
Advances on sales 131.8 225.6
Other accrued liabilities 1,460.3 1,526.3
Current liabilities of discontinued operations 127.1 161.1
======================== ========================
Total current liabilities 3,651.1 3,532.2
Senior long-term debt, excluding current installments 4,189.3 4,209.0
Subordinated debt 400.0 756.9
Preferred securities of subsidiary company - 175.0
Other noncurrent liabilities 1,101.0 961.0
Noncurrent liabilities of discontinued operations - 0.3
Common stockholders' equity 4,860.7 4,898.3
======================== ========================
$ 14,202.1 $ 14,532.7
======================== ========================