ConAgra Foods Inc. (NYSE:CAG): First-Quarter Fiscal 2006 Overview:
-- First-quarter fiscal 2006 diluted EPS was $0.68, reflecting a
large gain from selling 15.4 million shares of Pilgrim's Pride
Corporation common stock as well as a solid performance in several
areas of the business. -- The $0.68 per diluted share includes a
$0.40 per share gain from the sale of Pilgrim's Pride Corporation
common stock, $0.04 per share of expense from asset impairment and
plant closure costs, and $0.01 per share of earnings from
discontinued operations. These items impacting comparability are
summarized toward the end of this release. -- Prior-year earnings
of $0.26 per diluted share included $0.02 per share of net expense
related to implementing cost-saving initiatives. -- New chief
executive officer Gary Rodkin will join ConAgra Foods on Oct. 1.
ConAgra Foods Inc. (NYSE:CAG), one of North America's leading
packaged food companies, today reported results for the fiscal 2006
first quarter ended Aug. 28, 2005. First-quarter diluted EPS was
$0.68, and diluted EPS was $0.26 for the same period last year; the
major items affecting comparability are summarized toward the end
of this release. Sales for the quarter were $3.4 billion, slightly
less than the same period last year. Bruce Rohde, chairman and
chief executive officer of ConAgra Foods, commented, "Operating
profitability for fiscal 2006 is off to a good start. We are
executing better in key areas of our business, and we are also
encouraged by the fact that input cost inflation trends for some
items are moderating following the significant cost increases we
experienced in recent quarters. Fiscal 2006 should be a year of
solid operating profit performance as we continue to improve our
packaged meats operations and make our cost structure more
efficient." Retail Products Segment (58% of company sales) During
the quarter, sales for the Retail Products segment were $1.9
billion, a decrease of 4% compared with the same period last year;
sales mix was slightly negative, as volume declined 3%. Sales and
volume decreases reflect a combination of the effect of price
increases, customer and product mix changes, continued challenges
for some packaged meats products, and to a lesser extent, a
rigorous SKU (stock keeping unit) reduction program. -- Sales for
the company's top 30 brands as a group, which represent
approximately 80% of total segment sales, decreased 1% during the
quarter. -- Several brands posted strong sales performance as a
result of ongoing sales and marketing initiatives intended to
strengthen brand equity and improve category share performance.
Popular brands posting sales gains include: Butterball, Chef
Boyardee, DAVID, Kid Cuisine, La Choy, Manwich, Marie Callender's,
Orville Redenbacher's, Peter Pan, Slim Jim, Snack Pack, Van Camp's,
and Wesson. -- Those brands posting sales declines include: ACT II,
Armour, Banquet, Blue Bonnet, Cook's, Eckrich, Egg Beaters, Healthy
Choice, Hebrew National, Hunt's, PAM, Parkay, Reddi-wip, and Swiss
Miss. The Retail Products segment operating profit for the quarter
was $211 million, slightly above the amount reported for the same
quarter last year. Several factors contributed to the profit
performance, including price increases across several product
lines, more efficient manufacturing operations, and overall
cost-management efforts. Those factors largely offset higher input
costs for beef, steel, resin, and transportation. Profit margin
trends for the packaged meats operations have improved from the
trends experienced during the second half of fiscal 2005, even
though profits for those operations are substantially below desired
levels. The packaged meats operations are benefiting from new
management and lower pork input costs, as well as better net
pricing policies that are closely linked to SKU optimization
efforts and product and customer mix improvement. The company is
encouraged by the progress being made by the new packaged meats
team, and continues to expect year-over-year profit improvement for
these operations in the second half of fiscal 2006. $7 million of
costs associated with a plant closure in the current year, and $8
million of costs associated with implementing efficiency
initiatives in the prior year, impact year-over-year comparability
of segment operating profit. Foodservice Products Segment (23% of
company sales) Sales for the Foodservice Products segment were $790
million for the first quarter, roughly equal to the same period
last year. Segment operating profit was $80 million in the first
quarter, up from $66 million in the year-ago period. Last year's
operating profit includes $5 million of costs associated with
implementing efficiency initiatives as well as $11 million of
unfavorable production costs associated with a planned plant
consolidation. During the first quarter, specialty potato products
and culinary products increased volumes with key customers. Growth
in operating profits for specialty potato products and culinary
products primarily reflects increased volumes and improved
operating efficiencies. Due to tariff-related market dynamics,
sales and profits for seafood products were below year-ago levels.
Higher transportation costs for the overall segment were partially
offset by effective cost-management efforts. Food Ingredients
Segment (19% of company sales) During the quarter, sales for the
Food Ingredients segment were $631 million, an increase of 9%
compared with the first quarter last year. Segment operating profit
was $76 million, an increase of 27% over the year-ago period; this
increase was largely driven by a very favorable market environment
for the commodity trading and merchandising operations. Those
operations, which include trading and merchandising energy, grains,
fertilizer, and other input commodities, contributed $47 million of
the segment's total operating profit of $76 million. Despite a weak
performance from the dehydrated product lines, the specialty
ingredients products posted growth in sales and operating profit
due to a strong performance from the flour milling operations.
Pilgrim's Pride Stock Sale -- During the quarter, ConAgra Foods
sold all of its remaining 15.4 million shares of Pilgrim's Pride
Corporation (NYSE: PPC) common stock for approximately $482
million, resulting in a net pretax gain of approximately $329
million. That gain is classified on the company's income statement
as Gain on sale of Pilgrim's Pride Corporation common stock.
ConAgra Foods acquired these shares in the fall of 2003 in
connection with the divestiture of its chicken-processing
operations to Pilgrim's Pride. Equity Method Investments, Corporate
Expense, Capital Resource Matters, and Tax Rate -- Equity method
investments posted a pretax loss of $14 million for the first
quarter, reflecting impairment charges totaling $19 million
associated with two joint ventures. For the same quarter last year,
equity method investment earnings were $14 million. Prior to the
company's sale of its equity investment in Swift Foods during the
second quarter of fiscal 2005, that investment provided $7 million
of equity method investment earnings to ConAgra Foods during the
first quarter of fiscal 2005. -- For the first quarter, corporate
expense was $73 million, compared with $64 million for the same
period a year ago. -- For the quarter, capital expenditures for
property, plant, and equipment totaled $71 million compared with
$105 million last year. Depreciation and amortization expense was
approximately $89 million for the quarter versus $88 million a year
ago. Dividends paid totaled $141 million versus $135 million last
year. Net interest expense for the quarter was $68 million compared
with $73 million last year. -- At the end of the first quarter,
interest-bearing debt was $4.5 billion, compared with $5.7 billion
for the same period a year ago. Because of debt prepayments made in
fiscal 2005, the company has only $126 million of debt scheduled to
be paid in fiscal 2006. As of the end of the first quarter, the
company had more than $500 million of cash and cash equivalents on
hand. -- The company benefited from an effective tax rate of
approximately 36% in the quarter; that rate is slightly less than
the 38% effective tax rate in the first quarter of last year. The
company currently expects the effective tax rate for fiscal 2006 to
be in line with that of the first quarter. New CEO and New Chairman
of the Board Recently the company announced that Gary Rodkin will
become the company's new president and chief executive officer and
a member of its board of directors on Oct. 1. He will succeed Bruce
Rohde, the current chief executive officer. Board member Steven F.
Goldstone has been elected the non-executive chairman, commencing
Oct. 1. Mr. Goldstone is a retired chairman and chief executive
officer of RJR Nabisco, and succeeds Bruce Rohde, the company's
current chairman. Outlook As previously stated, the company
continues to expect fiscal 2006 EPS to be higher than fiscal 2005
EPS, excluding amounts that impact comparability. That earnings
improvement is expected to be more apparent in the second half of
the fiscal year as the company makes more progress working through
the issues that have negatively impacted the packaged meats
operations. Major Items Affecting First-Quarter Fiscal 2006 EPS
Comparability Included in diluted EPS of $0.68 for the first
quarter of fiscal 2006 (EPS amounts after tax): -- A gain of $0.40
per diluted share from the sale of Pilgrim's Pride Corporation
common stock that is classified as such on the company's income
statement. -- Expense of $0.03 per diluted share resulting from
impairment charges associated with two joint ventures. These
amounts are included in the equity method investment results. --
Expense of $0.01 per diluted share related to plant closure costs
classified as part of the results for the Retail Products segment.
-- Income of $0.01 per diluted share from discontinued operations.
Included in the $0.26 diluted EPS for the first quarter of fiscal
2005 (EPS amounts after tax): -- Expense of approximately $0.02 per
diluted share related to implementing cost-saving initiatives. 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." 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, 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, 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 ConAgra Foods will host a conference call at 9:00 a.m. EDT
to discuss first-quarter results. Following the company's remarks,
the call will include a question-and-answer session with the
investment community. Domestic and international participants may
access the conference call toll-free by dialing 1-877-447-8217 and
1-706-679-0415, respectively. No confirmation or pass code is
needed. This conference call also can be accessed live on the
Internet at www.conagrafoods.com/investors. A rebroadcast of the
conference call will be available after 2:00 p.m. EDT. To access
the digital replay, a conference I.D. number will be required.
Domestic participants should dial 1-800-642-1687, and international
participants should dial 1-706-645-9291 and enter conference I.D.
8266376. A rebroadcast also will be available on the company's Web
site, where it will be archived. In addition, the company has
posted a question-and-answer supplement relating to this release at
www.conagrafoods.com/investors. To view recent company news, please
visit www.conagrafoods.com/media. 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. -0- *T ConAgra Foods, Inc. Segment Operating Results In
millions FIRST QUARTER
----------------------------------------------- 13 Weeks 13 Weeks
Ended Ended --------------- --------------- --------------- August
28, 2005 August 29, 2004 Percent Change ---------------
--------------- --------------- SALES ----- Retail Products
$1,941.6 $2,014.2 (3.6)% Foodservice Products 789.9 792.2 (0.3)%
Food Ingredients 631.4 576.8 9.5% --------------- ---------------
Total 3,362.9 3,383.2 (0.6)% --------------- ---------------
OPERATING PROFIT ---------------- Retail Products $210.7 $209.8
0.4% Foodservice Products 79.5 66.4 19.7% Food Ingredients 76.3
60.1 27.0% --------------- --------------- Total operating profit
for segments 366.5 336.3 9.0% 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 corporate expense (73.0) (63.6)
14.8% Gain on sale of Pilgrim's Pride Corporation common stock
329.4 - 100.0% Interest expense, net (68.1) (73.4) (7.2)%
--------------- --------------- Income from continuing operations
before income taxes and equity method investment earnings (loss)
$554.8 $199.3 178.4% =============== =============== *T 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 facilitates
period-to-period comparison of results of segment operations. -0-
*T ConAgra Foods, Inc. Consolidated Statements of Earnings In
millions, except per share amounts FIRST QUARTER
----------------------------------------------- 13 Weeks Ended 13
Weeks Ended --------------- --------------- --------------- Percent
August 28, 2005 August 29, 2004 Change ---------------
--------------- --------------- Net sales $3,362.9 $3,383.2 (0.6)%
Costs and expenses: Cost of goods sold 2,635.4 2,700.4 (2.4)%
Selling, general and administrative expenses 434.0 410.1 5.8%
Interest expense, net 68.1 73.4 (7.2)% Gain on sale of Pilgrim's
Pride Corporation common stock 329.4 - 100.0% ---------------
--------------- Income from continuing operations before income
taxes and equity method investment earnings (loss) 554.8 199.3
178.4% Income tax expense 193.6 81.0 139.0% Equity method
investment earnings (loss) (13.9) 14.1 - ---------------
--------------- Income from continuing operations 347.3 132.4
162.3% Income from discontinued operations, net of tax 4.8 2.3
108.7% --------------- --------------- Net income $352.1 $134.7
161.4% =============== =============== Earnings per share - basic
Income from continuing operations $0.67 $0.26 157.7% Income from
discontinued operations 0.01 - 100.0% ---------------
--------------- Net income $0.68 $0.26 161.5% ===============
=============== Weighted average shares outstanding 518.1 517.0
0.2% =============== =============== Earnings per share - diluted
Income from continuing operations $0.67 $0.26 157.7% Income from
discontinued operations 0.01 - 100.0% ---------------
--------------- Net income $0.68 $0.26 161.5% ===============
=============== Weighted average share and share equivalents
outstanding 520.5 521.4 (0.2)% =============== ===============
ConAgra Foods, Inc. Consolidated Balance Sheets In millions August
28, 2005 August 29, 2004 --------------- ---------------- ASSETS
Current assets Cash and cash equivalents $501.4 $369.8 Receivables,
less allowance for doubtful accounts of $31.7 and $28.2 1,286.9
1,322.9 Inventories 2,756.3 2,584.9 Prepaid expenses and other
current assets 572.7 372.6 Current assets of discontinued
operations 8.5 257.6 --------------- ---------------- Total current
assets 5,125.8 4,907.8 Property, plant and equipment, net 2,834.5
2,868.7 Goodwill 3,794.0 3,791.2 Brands, trademarks and other
intangibles, net 819.3 826.4 Other assets 444.4 1,564.9 Noncurrent
assets of discontinued operations 0.4 54.9 ---------------
---------------- $13,018.4 $14,013.9 ===============
================ LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Notes payable $10.8 $22.4 Current installments of
long-term debt 119.1 366.9 Accounts payable 926.9 863.4 Advances on
sales 128.8 103.0 Accrued payroll 194.3 175.4 Other accrued
liabilities 1,177.4 1,245.0 Current liabilities of discontinued
operations 4.2 181.0 --------------- ---------------- Total current
liabilities 2,561.5 2,957.1 Senior long-term debt, excluding
current installments 3,943.5 4,887.1 Subordinated debt 400.0 400.3
Other noncurrent liabilities 1,121.9 1,154.8 Common stockholders'
equity 4,991.5 4,614.6 --------------- ---------------- $13,018.4
$14,013.9 =============== ================ *T
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