ConAgra Foods
Q3 FY06 Question & Answer
March 23, 2006
1. What were some examples of major brands in the Retail Products segment
posting sales growth for the quarter?
Chef Boyardee
DAVID
Egg Beaters
Healthy Choice
Hebrew National
Hunt's
Kid Cuisine
Marie Callender's
Orville Redenbacher
Peter Pan
Ranch Style
Reddi-wip
Ro*Tel
Snack Pack
Van Camp's
Retail sales for Banquet and Slim Jim were in line with last year's
amounts.
2. What were some examples of major brands in the Retail Products segment
posting sales declines for the quarter?
ACT II
Blue Bonnet
LaChoy
Manwich
Mama Rosa
PAM
Parkay
Rosarita
Swiss Miss
Wesson
Wolf
3. What were unit volume changes for the quarter in the Retail Products and
Foodservice Products segments?
Retail Products volume increased 4% in the current quarter.
Foodservice Products volume increased 1% in the current quarter.
4. How much was total Depreciation and Amortization for the quarter?
Approximately $91 million, of which approximately $78 million applied to
continuing operations (versus approximately $91 million in Q3 2005, of
which approximately $76 million applied to continuing operations).
5. How much was total Depreciation and Amortization for the fiscal
year-to-date?
Approximately $269 million, of which approximately $226 million applied to
continuing operations (versus $265 million through Q3 2005, of which
approximately $207 million applied to continuing operations.)
6. How much were Capital Expenditures for the quarter?
Approximately $61 million (versus approximately $97 million in Q3 2005),
including both continuing operations and discontinued operations.
7. How much were Capital Expenditures for the fiscal year-to-date?
Approximately $196 million (versus $353 million through Q3 2005), including
both continuing operations and discontinued operations.
8. What was the net interest expense for the quarter?
Approximately $62 million.
9. What was the net interest expense for the fiscal year-to-date?
Approximately $192 million.
10. What was Corporate Expense for the quarter?
Approximately $171 million, which includes approximately $77 million of
expense from items that impact comparability with the prior year.
11. What was Corporate Expense for the fiscal year-to-date?
Approximately $347 million.
12. How much did the company pay in dividends during the quarter?
$141 million
13. How much did the company pay in dividends fiscal year-to-date?
$ 424 million
14. What was the weighted average number of diluted shares outstanding for the
quarter?
521 million shares
15. What was the approximate effective tax rate for the quarter (rounded) for
continuing operations?
27%, including a benefit from changes in estimates related to state income
tax liabilities partially offset by the impact of non-deductible equity
method investment impairment charges. The lower effective tax rate
favorably impacted earnings by approximately $11 million or $0.02 per
diluted share.
16. What were the gross margins and operating margins for the quarter ($
amounts in millions, rounded)?
Gross Margin = Gross Profit* divided by Net Sales
Gross Margin = $715/$2,879 = 24.8%
Operating Margin = Segment Operating Profit** divided by Net Sales
Operating Margin = $360/$2,879 = 12.5%
* Gross Profit = Net Sales - Costs of Goods Sold ($2,879 - $2,164 = $715)
**See third-quarter segment operating results for a reconciliation of
Operating Profit to Income from continuing operations before income taxes
and equity method investment earnings (loss). Income from continuing
operations before income taxes and equity method investment earnings
(loss), divided by Net Sales = $126/$2,879 = 4.4%.
17. What was the trade working capital position at quarter end, excluding
amounts for discontinued operations?
Trade working capital is defined as the net position of Accounts Receivable
plus Inventory less Current Operating Liabilities (Accounts Payable,
Accrued Expenses, and Advances on Sales).
Q3 FY06 Q3 FY05
Accounts Receivable $ 1,159 $ 1,353
Inventory $ 2,489 $ 2,408
Less: Accounts Payable $ 892 $ 941
Less: Accrued Expenses $ 1,449 $ 1,596
Less: Advances on Sales $ 137 $ 171
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Net Position $ 1,170 $ 1,053
18. What is included in the company's net debt at the end of the quarter (in
millions)?
Q3 FY06 Q3 FY05
Total Debt* $ 3,842 $ 4,527
Less: Cash On Hand $ 237 $ 9
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Total $ 3,605 $ 4,518
* Total debt = notes payable, short-term debt, long-term debt, and
subordinated debt.
19. What were the significant changes to debt during the quarter?
At the end of the third quarter, interest-bearing debt was approximately
$3.8 billion, reflecting the fact that the company repaid approximately
$500 million of debt during the quarter. The current portion of long-term
debt reflects $400 million of 7.125% senior debt due October 2026 that has
been reclassified because of a put option that is exercisable by the
holders of the debt from Aug. 1, 2006 to Sept. 1, 2006. Based on current
market conditions, the company does not anticipate the holders to exercise
the put option, and therefore expects to reclassify the $400 million debt
back into senior long-term debt after Sept. 1, 2006 when the put option
expires.
20. What is the preliminary estimate of the effective tax rate for the fourth
quarter of fiscal 2006 (rounded), excluding any items impacting
comparability?
Approximately 36%.
21. What are the projected Capital Expenditures for fiscal 2006?
No more than $400 million.
22. What is the expected net interest expense for fiscal 2006?
Approximately $260-$270 million.
23. Please summarize (in tabular form) the EPS contribution from continuing and
discontinued operations as well as the net impact of major items impacting
comparability for Q3FY06 and Q3FY05.
- ---------------------------- -------------------------- -------------------------- --------------------------
EPS, including items Items that Impact EPS, excluding items
Q3FY06 Impacting Comparability Comparability* Impacting Comparability
- ---------------------------- -------------------------- -------------------------- --------------------------
Continuing Operations $0.18 ($0.14) $0.31**
Discontinued Operations ($0.24) ($0.30) $0.06
Total ($0.06) $0.43** $0.37**
- ---------------------------- -------------------------- -------------------------- --------------------------
EPS, including items Items that Impact EPS, excluding items
Q3 FY05 Impacting Comparability Comparability* Impacting Comparability
- ---------------------------- -------------------------- -------------------------- --------------------------
Continuing Operations $0.31 $0.00 (net) $0.31
Discontinued Operations $0.01 $0.03 $0.04
Total $0.32 $0.03 $0.35
*For a presentation of the items affecting comparability, please see the
section entitled "Major Items Affecting Third-Quarter Fiscal 2006
Comparability" in the accompanying Q3FY06 earnings release.
* *Impacted by rounding.
24. Does the company have any comment on discontinued operations for the
year-ago period?
Income from discontinued operations in the year-ago period was $0.01 after
tax, which includes ($0.03) of loss, including impairment charges, from
specialty meats operations, which the company no longer owns; this was more
than offset by $0.04 of income from operations yet to be divested,
specifically packaged meats, seafood, and cheese. The company considers the
($0.03) to impact comparability because the company no longer owns the
operations that generated the ($0.03). The company does not consider the
other $0.04 to impact comparability, as those earnings came from operations
still owned by the company; as such, results from those operations are
included in both current year and prior year amounts.
25. What are the revised historical segment results as a result of the
classification change that took place this quarter?
Please see the attached tables--one shows segment information and the other
shows the entire P/L information.
ConAgra Foods, Inc.
Segment Operating Results: Q3 FY06
($USD, in Millions)
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FY 2005 FY 2006
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Q1 FY05 Q2 FY05 Q3 FY05 Q4 FY05 Total Q1 FY06 Q2 FY06 Q3 FY06 YTD FY06
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Segment Sales
Retail Products $ 1,518.1 $ 1,866.9 $ 1,607.3 $ 1,630.2 $ 6,622.5 $ 1,503.2 $ 1,752.2 $ 1,661.3 $ 4,916.7
Foodservice Products 535.7 560.0 541.4 571.7 2,208.8 565.6 585.5 561.1 1,712.2
Food Ingredients 576.8 691.3 607.6 794.9 2,670.6 631.4 688.0 656.5 1,975.9
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Total 2,630.6 3,118.2 2,756.3 2,996.8 11,501.9 2,700.2 3,025.7 2,878.9 8,604.8
Segment Operating Profit
Retail Products 181.3 314.7 271.5 206.0 973.5 180.9 256.7 248.1 685.7
Foodservice Products 68.2 83.2 57.0 63.6 272.0 74.5 86.7 41.1 202.3
Food Ingredients 60.1 79.1 59.9 64.1 263.2 76.2 53.3 70.7 200.2
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Total 309.6 477.0 388.4 333.7 1,508.7 331.6 396.7 359.9 1,088.2
Reconciliation of total operating profit to income
from continuing operations before income taxes
and equity method investment earnings (loss)
Items excluded from segment operating profit:
General and corporate expense (63.6) (77.0) (137.8) (123.7) (402.1) (73.0) (103.1) (170.5) (346.6)
Gain on sale of Pilgrim's Pride
Corporation common stock - - 185.7 - 185.7 329.4 - - 329.4
Interest expense, net (73.4) (85.8) (68.1) (67.7) (295.0) (68.1) (62.3) (61.8) (192.2)
Income from continuing operations before
income taxes and equity method investment
earnings (loss) $ 172.6 $ 314.2 $ 368.2 $ 142.3 $ 997.3 $ 519.9 $ 231.3 $ 127.6 $ 878.8
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Segment operating profit excludes general corporate expense, gain on sale
of Pilgrim's Pride Corporation common stock, equity method investment
earnings (loss) and net interest expense. Management believes such amounts
are not directly associated with segment performance results for the
period. Management believes the presentation of total operating profit for
segments facilities period-to-period comparison of results of segment
operations.
CONAGRA FOODS, INC.
Income Statement for FY06 YTD, FY05
($USD, in millions)
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FY 2005 FY 2006
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Q1 FY05 Q2 FY05 Q3 FY05 Q4 FY05 YTD FY 05 Q1 FY06 Q2 FY06 Q3 FY06 YTD FY 06
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Net sales $ 2,630.6 $ 3,118.2 $ 2,756.3 $ 2,996.8 $ 11,501.9 $ 2,700.2 $ 3,025.7 $ 2,878.9 $ 8,604.8
Costs and expenses
Costs of goods sold 2,004.1 2,311.3 2,046.1 2,312.9 8,674.4 2,031.5 2,298.5 2,164.1 6,494.1
SG&A expenses 380.5 406.9 459.6 473.9 1,720.9 410.1 433.6 525.4 1,369.1
Interest expenses, net 73.4 85.8 68.1 67.7 295.0 68.1 62.3 61.8 192.2
Gain on sale of Pilgrim's
Pride Corporation common stock - - 185.7 - 185.7 329.4 - - 329.4
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2,458.0 2,804.0 2,388.1 2,854.5 10,504.6 2,180.3 2,794.4 2,751.3 7,726.0
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Income from continuing operations
before income taxes and equity method
investment earnings (loss) 172.6 314.2 368.2 142.3 997.3 519.9 231.3 127.6 878.8
Income tax expense (benefit) 70.9 126.1 144.8 68.1 409.9 181.2 86.7 34.3 302.2
Equity method investment earnings 14.0 15.1 (64.0) 10.1 (24.8) (13.9) (16.7) (0.6) (31.2)
Income from continuing operations 115.7 203.2 159.4 84.3 562.6 324.8 127.9 92.7 545.4
Income (loss) from discontinued
operations 19.0 36.2 5.9 17.7 78.8 27.2 35.3 (124.4) (61.9)
Net income $ 134.7 $ 239.4 $ 165.3 $ 102.0 $ 641.4 $ 352.0 $ 163.2 $ (31.7) $ 483.5
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