ConAgra Foods Inc. (NYSE:CAG): -- Solid Operating Performance;
Three of Four Segments Post Operating Profit Growth -- Fiscal 2007
EPS Outlook Increased Based on 8.7 Million Shares Repurchased This
Quarter ConAgra Foods Inc. (NYSE:CAG), one of North America's
leading packaged food companies, today reported results for the
fiscal 2006 fourth quarter ended May 28, 2006. Fourth-quarter
fiscal 2006 diluted earnings per share were $0.21, including $0.11
per share of net expense from items that impact comparability.
Excluding the $0.11 per share of net expense from items that impact
comparability, fourth-quarter diluted EPS was $0.32. Diluted EPS in
the year-ago period was $0.20, which included $0.06 of net expense
from items that impact comparability. -- Current quarter diluted
EPS of $0.09 from continuing operations includes $0.18 per share of
net expense from items impacting comparability, primarily
restructuring and impairment charges; excluding those items, EPS
from continuing operations was $0.27. -- Current quarter diluted
EPS of $0.12 from discontinued operations includes $0.07 per share
of income from a gain on divestitures; excluding that item, EPS
from discontinued operations was $0.05. Gary Rodkin, ConAgra Foods'
chief executive officer, commented, "We had a solid finish to the
fiscal year, but more importantly, we finalized key aspects of our
organizational restructuring and plant rationalization initiatives
that will result in improved efficiencies." He continued, "As we
communicated when we outlined our three-year plans last March, we
expect fiscal 2007 to show a more efficient cost structure and
appropriately focused marketing investment. Our entire organization
is very focused on achieving our fiscal 2007 financial goals."
During the quarter, the company began reporting its operations in
four segments: Consumer Foods, Food and Ingredients, Trading and
Merchandising, and International Foods. Historical segment results
have been adjusted to reflect the segment changes. Consumer Foods
Segment (57% of annual sales) Branded consumer products sold in
retail and foodservice channels; excludes international consumer
operations. During the quarter, sales for the Consumer Foods
segment were $1.6 billion, roughly equal to the same period last
year, reflecting pricing gains that mostly offset a 2% volume
decline. -- Quarterly sales for the company's top 30 brands which,
as a group, represent over 80% of total segment sales, increased 1%
over year-ago amounts. Many of the company's priority brands posted
year-over-year sales growth. -- Major brands posting sales growth
include Chef Boyardee, Egg Beaters, Hebrew National, Hunt's, Marie
Callender's, Orville Redenbacher's, PAM, and Reddi-wip. -- Major
brands posting sales declines include ACT II, Banquet, Healthy
Choice, Slim Jim, and Snack Pack. -- A more complete list of brand
gains and declines is included in the question-and-answer
supplement to this release, which is posted on the company's Web
site. Segment operating profit was $188 million for the quarter, 2%
ahead of $184 million reported last year. Excluding restructuring
charges of $44 million in the current quarter and $28 million of
severance costs in the year-ago period, current quarter operating
profit grew 9% despite an increase in marketing investment; the
comparable profit growth reflects productivity gains and improved
product mix. Food and Ingredients Segment (28% of annual sales)
Specialty potato, dehydrated vegetable, seasonings, blends,
flavors, and milled products sold to foodservice and commercial
channels worldwide. During the quarter, sales for the Food and
Ingredients segment were $823 million, 6% ahead of last year,
reflecting strong volume growth from Lamb Weston specialty potato
operations, improved volume, pricing, and mix for dehydrated
garlic, onion, and vegetable products, and increased flour selling
prices driven by higher input costs. Segment operating profit was
$93 million for the quarter, 22% ahead of $77 million reported last
year, reflecting the strength of the potato and dehydrated products
operations. There were restructuring charges of $5 million in the
current quarter and $3 million of severance costs in the year-ago
period. Trading and Merchandising Segment (10% of annual sales)
Trading and merchandising agricultural commodities, fertilizer, and
energy worldwide. During the quarter, sales for the Trading and
Merchandising segment were $359 million, 16% below year-ago
amounts; the decrease was driven mostly by lower volumes and
selling prices for wholesale fertilizer operations as well as less
favorable trading conditions for energy-related products. Segment
operating profit was $36 million, 35% below year-ago amounts. The
operating profit decrease reflects substantially lower profits from
energy-related products and fertilizer, although profits from
agricultural commodities such as livestock, grains, and by-products
increased. International Foods Segment (5% of annual sales) Branded
consumer products sold internationally to retail channels. During
the quarter, sales for the International Foods segment were $156
million, roughly equal to the same period last year. Segment
operating profit was $23 million for the quarter, 14% ahead of $20
million reported last year, primarily reflecting a strong sales
performance from mix improvements driven by popcorn and canned
pasta. Results for Canada and Mexico, the largest of the company's
international markets, showed year-over-year profit declines;
however, the company made progress in Asian and Caribbean markets.
Other Items -- For the fourth quarter, corporate expense was $213
million. Current-quarter results include $30 million of expense
related to restructuring charges, $26 million of expense related to
early retirement of debt, and $41 million for a charge related to
an impairment of a note receivable. Prior-year corporate expense of
$124 million included $11 million of expense associated with
headcount reduction. -- Equity investments posted a loss of $18
million for the fourth quarter, reflecting an impairment charge of
$24 million, with no tax benefit, from a revision in the estimated
fair value for an equity method investment. For the same quarter
last year, equity investments posted earnings of $10 million and
included no impairment charges. -- Net interest expense for the
quarter was $54 million compared with $68 million last year. -- The
effective tax rate for continuing operations for the quarter was
11%, reflecting the benefit of changes in estimates related to
certain state and foreign tax matters, partially offset by the
impact of non-deductible impairment charges. The company considers
36% to be the effective tax rate on continuing operations going
forward. The EPS impact of the lower rate is cited as an item
impacting comparability detailed at the end of this release.
Capital Items -- During the quarter, the company completed the
divestiture of its ham and seafood businesses and received pretax
proceeds of approximately $440 million. The gain was approximately
$111 million pretax and approximately $35 million after tax. -- The
company repurchased approximately 8.7 million shares of common
stock during the fourth quarter at a total cost of approximately
$197 million. -- Dividends paid totaled $142 million versus $141
million last year; this reflects the payment on March 1, 2006. --
The dividend action communicated on March 16, 2006, which lowered
the dividend to $0.18 per share per quarter, was reflected in the
June 1, 2006 payment. -- At the end of the fourth quarter,
interest-bearing debt was approximately $3.6 billion, reflecting
the redemption of $250 million of the company's 7.875% senior debt
due September 2010; $500 million of that senior debt is still
outstanding. 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. -- For the
quarter, total capital expenditures for property, plant, and
equipment were $92 million compared with $102 million in the
year-ago period. Depreciation and amortization expense from
continuing operations was approximately $85 million for the
quarter; this compares with a total of $77 million in the year-ago
period. Discontinued Operations During the second half of fiscal
2006, ConAgra Foods announced the intended divestiture of its ham,
seafood, packaged meats, and cheese operations. Those businesses,
which represented aggregate annual revenue of approximately $2.8
billion, have been reclassified as discontinued operations. During
the fourth quarter, the company completed the sale of its ham and
seafood businesses. Diluted earnings per share from discontinued
operations were $0.12 for the quarter, which includes the gain on
divestitures of $0.07 per share. Excluding that item, EPS from
discontinued operations was $0.05 for the quarter. Impact of Recent
Share Repurchases on Outlook At its March 2006 Analyst and Investor
Event, the company estimated that fiscal 2007 EPS from continuing
operations would be in the range of $1.10 - $1.15. Those amounts
did not reflect any EPS benefit from allocating divestiture
proceeds towards share repurchases or debt reduction. Those amounts
also do not reflect items that could impact comparability,
including but not limited to restructuring and impairment charges
and gains and losses on sales of assets; the timing of such events
and therefore the impact on fiscal 2007 EPS cannot be estimated at
this time. During the fourth quarter of fiscal 2006, the company
repurchased approximately $197 million of its stock; this is
expected to add approximately $0.02 of annual benefit to the
previously cited EPS goals. Regarding divestitures yet to be
completed, the company notes that the plans are proceeding as
expected. To the extent that the company completes any significant
transactions in fiscal 2007, it is uncertain whether the company
would receive proceeds in time for any resulting share repurchases
or debt reduction to significantly impact the EPS outlook for
fiscal 2007. This reflects the customary delay between reaching an
agreement and receiving proceeds, and the fact that the company may
conduct its share repurchases at only certain times within the
fiscal year. Quarterly Earnings Patterns in Fiscal 2007 The company
expects to achieve its fiscal 2007 EPS target of $1.12 - $1.17 from
continuing operations, which includes the $0.02 benefit discussed
above and does not reflect items that could impact comparability.
The company is not offering guidance with regard to contribution
from discontinued operations, as those are expected to be sold
during the fiscal year. The company has the following quarterly
expectations for EPS from continuing operations, excluding items
that impact comparability, in fiscal 2007: -- First-quarter fiscal
2007 EPS from continuing operations is expected to be in the range
of $0.04 lower than comparable year-ago amounts. This primarily
reflects the fact that the commodity trading and merchandising
operations had an extremely strong performance in the first quarter
of fiscal 2006, and the company does not plan to repeat this
performance in the first quarter of fiscal 2007. -- The company
expects year-over-year improvement in EPS from continuing
operations in the second through fourth quarters, largely driven by
progress with the cost-savings initiatives under way in general and
administrative functions as well as the supply chain. Other
Reference At its Analyst and Investor Event last March, the company
announced plans to focus on increasing shareholder value by
delivering more consistent, sustainable profit growth over time.
These plans involve increasing investment behind the most promising
brands, achieving significant cost savings in manufacturing and
administrative functions, and divesting non-core operations. For
more details on the plans, please see
www.conagrafoods.com/investors, which references the Analyst and
Investor Event on March 16, 2006. 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. Major Items Affecting
Fourth-Quarter Fiscal 2006 EPS Comparability Included in the $0.21
diluted EPS for the fourth quarter of fiscal 2006 (EPS amounts
rounded and after tax): Classified within Continuing Operations: --
Expense of $0.09 per diluted share, or $79 million pretax, for
restructuring charges related to programs designed to reduce the
company's ongoing operating costs. These are classified as $44
million of expense within the Consumer Foods segment, $5 million of
expense within the Food and Ingredients segment, and $30 million of
corporate expense. -- Expense of $0.05 per diluted share, or $41
million pretax, for a charge related to a note receivable, which is
included in corporate expense. -- Expense of $0.05 per diluted
share, or $24 million, resulting from asset impairment charges
associated with an equity method investment, and classified within
the results of equity method investments. There is no tax benefit
related to these charges. -- Expense of $0.03 per diluted share, or
$26 million pretax, for a charge related to early retirement of
debt, which is included in corporate expense. -- Benefit of $0.04
per diluted share for a lower than normal tax rate. Classified
within Discontinued Operations: -- Gain of $0.07 per diluted share
on divestitures of businesses included in discontinued operations.
Included in the $0.20 diluted EPS for the fourth quarter of fiscal
2005 (EPS amounts after tax): -- Expense of $0.05 per diluted
share, or $43 million pretax, related to headcount reduction
program. -- Expense of $0.01 per diluted share, related to change
in estimated effective state income tax rates. Discussion of
Results ConAgra Foods will host a conference call at 9 a.m. EDT to
discuss fourth-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 1 p.m. EDT. To access the
digital replay, a conference ID number will be required. Domestic
participants should dial 1-800-642-1687, and international
participants should dial 1-706-645-9291 and enter conference ID
9609787. A rebroadcast also will be available on the company's Web
site. ConAgra Foods Inc. (NYSE:CAG) is one of North America's
largest packaged food companies, serving grocery retailers, as well
as restaurants and other foodservice establishments. Popular
ConAgra Foods consumer brands include: Banquet, Chef Boyardee, Egg
Beaters, Healthy Choice, Hebrew National, Hunt's, Marie
Callender's, Orville Redenbacher's, PAM, Reddi-wip, and many
others. 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: CONTINUING OPERATIONS In millions FOURTH QUARTER
------------------------------------- 13 Weeks Ended 13 Weeks Ended
-------------- -------------- ------- Percent May 28, 2006 May 29,
2005 Change -------------- -------------- ------- SALES -----
Consumer Foods $1,637.2 $1,642.4 (0.3)% International Foods 155.5
155.1 0.3% Food and Ingredients 823.0 774.0 6.3% Trading and
Merchandising 358.9 427.1 (16.0)% -------------- --------------
Total 2,974.6 2,998.6 (0.8)% -------------- --------------
OPERATING PROFIT ---------------- Consumer Foods $187.9 $183.4 2.5%
International Foods 22.5 19.7 14.2% Food and Ingredients 93.4 76.6
21.9% Trading and Merchandising 36.0 55.0 (34.5)% --------------
-------------- Total operating profit for segments 339.8 334.7 1.5%
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 (213.3) (123.8) 72.3% Interest expense,
net (54.4) (67.7) (19.6)% -------------- -------------- Income from
continuing operations before income taxes and equity method
investment earnings (loss) 72.1 143.2 (49.7)% ==============
============== Segment operating profit excludes general corporate
expense, 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. ConAgra Foods, Inc. Segment Operating Results:
CONTINUING OPERATIONS In millions YEAR TO DATE
------------------------------------- 52 Weeks Ended 52 Weeks Ended
-------------- -------------- ------- Percent May 28, 2006 May 29,
2005 Change -------------- -------------- ------- SALES -----
Consumer Foods $6,600.6 $6,715.4 (1.7)% International Foods 604.4
578.2 4.5% Food and Ingredients 3,188.6 2,985.8 6.8% Trading and
Merchandising 1,185.8 1,224.3 (3.1)% -------------- --------------
Total 11,579.4 11,503.7 0.7% -------------- --------------
OPERATING PROFIT ---------------- Consumer Foods $838.5 $944.4
(11.2)% International Foods 62.3 62.7 (0.6)% Food and Ingredients
358.4 305.9 17.2% Trading and Merchandising 168.7 196.8 (14.3)%
-------------- -------------- Total operating profit for segments
1,427.9 1,509.8 (5.4)% 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 (559.9) (402.2) 39.2%
Gain on sale of Pilgrim's Pride Corporation common stock 329.4
185.7 77.4% Interest expense, net (246.6) (295.0) (16.4)%
-------------- -------------- Income from continuing operations
before income taxes and equity method investment earnings (loss)
$950.8 $998.3 (4.8)% ============== ============== 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.
ConAgra Foods, Inc. Consolidated Statements of Earnings In
millions, except per share amounts FOURTH QUARTER
------------------------------------- 13 Weeks Ended 13 Weeks Ended
-------------- -------------- ------- Percent May 28, 2006 May 29,
2005 Change -------------- -------------- ------- Net sales
$2,974.6 $2,998.6 (0.8)% Costs and expenses: Cost of goods sold
2,275.0 2,313.8 (1.7)% Selling, general and administrative expenses
573.1 473.9 20.9% Interest expense, net 54.4 67.7 (19.6)%
-------------- -------------- Income from continuing operations
before income taxes and equity method investment earnings (loss)
72.1 143.2 (49.7)% Income tax expense 5.9 66.2 (91.1)% Equity
method investment earnings (loss) (18.4) 10.0 NA --------------
-------------- Income from continuing operations 47.8 87.0 (45.1)%
Income from discontinued operations, net of tax 60.7 14.8 310.1%
-------------- -------------- Net income $108.5 $101.8 6.6%
============== ============== Earnings per share - basic Income
from continuing operations $0.09 $0.17 (47.1)% Income from
discontinued operations 0.12 0.03 300.0% --------------
-------------- Net income $0.21 $0.20 5.0% ==============
============== Weighted average shares outstanding 516.8 517.3
(0.1)% ============== ============== Earnings per share - diluted
Income from continuing operations $0.09 $0.17 (47.1)% Income from
discontinued operations 0.12 0.03 300.0% --------------
-------------- Net income $0.21 $0.20 5.0% ==============
============== Weighted average share and share equivalents
outstanding 518.8 521.0 (0.4)% ============== ==============
ConAgra Foods, Inc. Consolidated Statements of Earnings In
millions, except per share amounts YEAR TO DATE
-------------------------------------- 52 Weeks Ended 52 Weeks
Ended -------------- -------------- -------- Percent May 28, 2006
May 29, 2005 Change -------------- -------------- -------- Net
sales $11,579.4 $11,503.7 0.7% Costs and expenses: Cost of goods
sold 8,769.2 8,675.3 1.1% Selling, general and administrative
expenses 1,942.2 1,720.8 12.9% Interest expense, net 246.6 295.0
(16.4)% Gain on sale of Pilgrim's Pride Corporation common stock
329.4 185.7 77.4% -------------- -------------- Income from
continuing operations before income taxes and equity method
investment earnings (loss) 950.8 998.3 (4.8)% Income tax expense
308.0 408.0 (24.5)% Equity method investment earnings (loss) (49.6)
(24.8) (100.0)% -------------- -------------- Income from
continuing operations 593.2 565.5 4.9% Income (loss) from
discontinued operations, net of tax (1.2) 76.0 NA --------------
-------------- Net income $592.0 $641.5 (7.7)% ==============
============== Earnings per share - basic Income from continuing
operations $1.14 $1.09 4.5% Income (loss) from discontinued
operations - 0.15 (100.0)% -------------- -------------- Net income
$1.14 $1.24 (8.0)% ============== ============== Weighted average
shares outstanding 518.0 516.2 0.3% ============== ==============
Earnings per share - diluted Income from continuing operations
$1.14 $1.09 4.5% Income (loss) from discontinued operations - 0.14
(100.0)% -------------- -------------- Net income $1.14 $1.23
(7.3)% ============== ============== Weighted average share and
share equivalents outstanding 520.1 520.2 0.0% ==============
============== ConAgra Foods, Inc. Consolidated Balance Sheets In
millions May 28, 2006 May 29, 2005 ------------ ------------ ASSETS
Current assets Cash and cash equivalents $331.6 $207.6 Receivables,
less allowance for doubtful accounts of $27.8 and $30.1 1,180.9
1,260.8 Inventories 2,132.5 2,153.6 Prepaid expenses and other
current assets 741.3 631.3 Current assets held for sale 256.3 521.5
------------ ------------ Total current assets 4,642.6 4,774.8
Property, plant and equipment, net 2,280.7 2,365.0 Goodwill 3,446.1
3,451.5 Brands, trademarks and other intangibles, net 799.5 801.0
Other assets 346.3 798.4 Noncurrent assets held for sale 496.6
852.1 ------------ ------------ $12,011.8 $13,042.8 ============
============ LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Notes payable $10.0 $8.5 Current installments of
long-term debt 421.1 117.3 Accounts payable 868.9 781.6 Advances on
sales 103.2 149.6 Accrued payroll 310.9 269.7 Other accrued
liabilities 1,248.0 1,247.4 Current liabilities held for sale 2.7
65.6 ------------ ------------ Total current liabilities 2,964.8
2,639.7 Senior long-term debt, excluding current installments
2,754.8 3,949.2 Subordinated debt 400.0 400.0 Other noncurrent
liabilities 1,180.8 1,189.3 Noncurrent liabilities held for sale
3.2 5.4 Common stockholders' equity 4,708.2 4,859.2 ------------
------------ $12,011.8 $13,042.8 ============ ============ *T
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