EX-99.1
FOR IMMEDIATE RELEASE
OMAHA, Neb., May 12, 1999 -- ConAgra, Inc. (NYSE: CAG) today announced a
restructuring initiative as the next step in Operation Overdrive, the company's
major strategic thrust to spur top line growth and reduce expenses to power
premium earnings growth. ConAgra is targeting annual savings of $600 million and
substantial profit margin improvement by leveraging the collective strengths of
its operating companies.
Operation Overdrive
"Operation Overdrive began last summer with plans for extensive benchmarking
analysis, a framework for instilling ConAgra-wide teamwork, and a series of
moves to strengthen our company's operating and corporate staff leadership,"
said Bruce Rohde, ConAgra's chairman and chief executive officer. "Since then,
we've launched ConAgra's strategic sourcing initiative and expanded Operation
Overdrive to encompass an array of other cost-cutting and sales-enhancing
initiatives. The restructuring initiative announced today will help us achieve
our Overdrive goals.
"Why call it 'Overdrive?' Overdrive is a gear that increases an engine's power
output by leveraging its horsepower, while reducing fuel consumption and engine
wear. Similarly, the name 'Overdrive' aptly describes our efforts to boost
ConAgra's sales and earnings by leveraging our resources while reducing
expenses."
Team ConAgra
"A fundamental underpinning of Operation Overdrive is ConAgra's intensified
focus on leveraging the collective strengths of our operating companies," said
Mr. Rohde. "We are tapping a heightened commitment to ConAgra-wide teamwork to
share best practices among our 80-plus operating companies so we can buy better,
manufacture better and distribute better. We believe that the power of Team
ConAgra will help us accelerate top line and bottom line growth."
Overdrive Objectives
Over ConAgra's next three fiscal years starting this June, Operation Overdrive
is expected to help ConAgra achieve the following results:
-- Generate annual savings accelerating to $600 million to reinvest in
profitable top line growth and bolster earnings. Two-thirds of the
savings are expected to come from Operation Overdrive initiatives
other than restructuring;
-- Expand pretax profit margins 50 percent to 6.5 percent from 4.3
percent; and
-- Achieve ConAgra's trend line earnings growth objective by averaging
at least 14-percent annual earnings-per-share growth, excluding
non-recurring charges.
Mr. Rohde said, "We'll begin to reap significant Operation Overdrive benefits in
ConAgra's fiscal year 2000, which starts next month. In fiscal year 2000, we
expect double-digit earnings growth, and we are targeting earnings-per-share
growth of at least 14 percent, excluding non-recurring charges."
Restructuring Initiatives And Investment
"We plan to grow ConAgra on a stronger, more competitive production and
distribution base," Mr. Rohde said. "To carry out Operation Overdrive, we are
restructuring to eliminate less efficient capacity, reduce overhead and
streamline ConAgra for the pursuit of aggressive growth. We deeply regret that a
necessary initial outcome of restructuring is a reduction in ConAgra's
workforce. However, we also will invest about $200 million and create new jobs
over the next two years to extract full value from consolidated facilities."
ConAgra will close at least 15 production plants, close at least 70 storage,
distribution and smaller processing facilities, exit approximately 20 small
non-core businesses or lines of business, and reduce the company's workforce by
approximately 7,000 employees. Specific facilities and businesses will not be
identified publicly until after affected employees have been notified.
Accounting for these items will generate pretax charges of approximately $810
million spread over three years, with most incurred in the first year, starting
with approximately $420 million in fiscal year 1999's fourth quarter ending May
30, 1999. Of the total charges, about $180 million is expected to be a cash
expense, offset partially by $90 million in cash proceeds from business and
facility dispositions. Pretax savings are projected at $100 million in fiscal
year 2000, $150 million in fiscal year 2001 and $200 million in fiscal year
2002.
With Operation Overdrive's continuing emphasis on streamlining and increasing
efficiency, ConAgra expects to identify additional restructuring initiatives and
related charges of up to $400 million, beyond the $810 million identified above,
during the next two years.
Driving Top Line Growth
Mr. Rohde noted, "Operation Overdrive ultimately is more about profitable top
line growth than cost reduction. Overdrive's substantial savings will generate
additional funds to invest in
supply chain management, product innovation, brand equities, marketing execution
and acquisitions."
Branded food products, led by 25 $100-million brands, power well over half of
ConAgra's earnings. As part of Operation Overdrive, ConAgra has strengthened
marketing leadership focused on top line growth driven by ConAgra's operating
companies acting individually and in concert. "We expect that collaborative
product development and marketing will provide extra lift to volume growth in
the grocery sector," said Mr. Rohde.
Mr. Rohde continued, "In the foodservice sector, ConAgra is the U.S. leading
manufacturer of foodservice products. With Operation Overdrive we are harnessing
and channeling the potential of our diverse foodservice operations through
ConAgra's Foodservice Sales Company created earlier this fiscal year. We are
organizing around our foodservice customers to serve their needs more
efficiently."
Strategic Sourcing
ConAgra's strategic sourcing initiative is aimed at becoming a much more
efficient customer by leveraging ConAgra-wide annual procurement of $18 billion
of commodity inputs, raw materials, packaging and other basic goods and
services. ConAgra is presently implementing strategic sourcing actions in more
than a dozen procurement categories, ranging from packaging to ocean freight,
involving purchasing from external sources.
ConAgra also intends to source internally an additional $1 billion of goods and
services previously procured outside ConAgra. Internal sourcing will keep more
profit margin inside ConAgra and enable source businesses to use capacity more
efficiently and profitably.
Mr. Rohde commented, "Our strategic sourcing opportunity is huge. We
conservatively estimate that ConAgra will achieve at least $250 million per year
in sustainable savings and profit leverage within three years."
Operational Improvement
Operation Overdrive also involves benchmarking ConAgra's operating companies and
elevating their business processes to best practices. Mr. Rohde stated, "Some of
our businesses can legitimately claim best-in-industry status, but others have
significant room for improvement in inventory and receivables management,
marketing effectiveness, manufacturing efficiency and support systems and
staffing. We expect that Operation Overdrive's aggressive programs to close
performance gaps will lead to at least $200 million more in annual expense
reduction and profit contribution."
Company Description
ConAgra is a diversified international food company. ConAgra employs
approximately 83,000 people at about 250 production facilities and 1,150 total
locations. The company's annual sales exceed $24 billion. ConAgra's leading food
brands include Act II, Armour, Banquet, Blue Bonnet, Butterball, Chun King,
Cook's, County Line, Country Pride, Decker, Eckrich, Egg Beaters, Fleischmann's,
Healthy Choice, Hebrew National, Hunt's and Hunt's Snack Pack, Inland Valley, La
Choy, Marie Callender's, Orville Redenbacher's, Parkay, Peter Pan, Slim Jim,
Swift Premium, Swiss Miss, Van Camp's, and Wesson.
Operation Overdrive Discussion
An audio discussion of Operation Overdrive by ConAgra executives Bruce Rohde,
chairman and chief executive officer, Jim O'Donnell, executive vice president,
chief financial officer and corporate secretary, and Walt Casey, senior vice
president, investor relations and business analysis will be aired at 4:00 p.m.
Central Daylight Time today, May 12, 1999, and will be repeated through 5:00
p.m. Central Daylight Time on May 26, 1999. To listen, access
http://www.videonewswire.com/CONAGRA/051299 on the Internet, or dial
(800)-964-4185.
Forward-Looking Statements
This news release contains forward-looking statements that reflect management's
current views and estimates of future economic circumstances, industry
conditions, company performance and financial results.
The statements are based on many assumptions and factors including availability
and prices of raw materials, product pricing, competitive environment and
related market conditions, operating efficiencies, access to capital and actions
of governments. Any changes in such assumptions or factors could produce
significantly different results.