ConAgra Foods, Inc. (NYSE:CAG), one of North America's leading
packaged food companies, today reported preliminary results for the
fiscal 2007 first quarter ended Aug. 27, 2006. Today's results are
preliminary because the results of discontinued operations have not
yet been finalized to reflect items being adjusted in preparation
for the closing of the refrigerated meats transaction; these
adjustments are customary in transactions of this nature and may
affect the results from discontinued operations in the first
quarter. Diluted EPS from continuing operations was $0.21,
including $0.05 per diluted share of restructuring costs. Diluted
EPS from continuing operations of $0.26 excluding restructuring
costs was higher than the company originally expected when it gave
guidance last June. Items impacting comparability in the current
year and prior year are summarized toward the end of this release.
Gary Rodkin, ConAgra Foods' chief executive officer, commented, "I
am pleased with our progress on cost savings and on completing the
divestitures outlined last March. Rapid implementation of the
divestiture program allows us to focus on further cost-reduction
opportunities earlier than originally expected. We will allocate an
increasing portion of the savings toward high-quality marketing
programs and investments in innovation, a process which will likely
accelerate through the balance of fiscal 2007." He continued, "In
addition, we are reducing fixed manufacturing costs by implementing
the first steps of our plant rationalization program originally
announced last March and further detailed last week. That program,
along with other supply chain improvement initiatives, is expected
to generate savings that help us offset inflation, increase
marketing investment, and deliver sustainable earnings growth.
Today we have raised our expectations for fiscal 2007 EPS
performance from continuing operations by $0.05 per diluted share
based upon our confidence in the company's ability to improve
efficiencies. We will update investors periodically on how our
operating initiatives and capital allocation decisions impact the
fiscal 2007 outlook." Consumer Foods Segment (56% of first-quarter
sales) Branded consumer products sold in retail and foodservice
channels; excludes international consumer operations. For the
quarter, sales for the Consumer Foods segment were $1.5 billion, 1%
ahead of last year. Volume grew 1%. The high-focus brands as a
group, which represent more than two-thirds of segment sales,
posted 4% sales growth that more than offset revenue declines in
lower-priority brands. The lower-priority brands as a whole
produced increased profits, as the company improved its trade
efficiency and customer and product mix on these brands. A list of
major 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 $181 million
for the quarter, 9% ahead of the $166 million reported for last
year, largely reflecting more efficient operations and mix
improvement. Excluding restructuring charges of $26 million in the
current quarter, operating profit increased 24% over year-ago
amounts. Advertising and promotion expense was slightly lower than
in the year-ago period, but is expected to increase throughout the
balance of fiscal 2007 behind more effective marketing programs
that have now been developed. Food and Ingredients Segment (31% of
first-quarter sales) Specialty potato, dehydrated vegetable,
seasonings, blends, flavors, and milled grain products sold to
foodservice and commercial channels worldwide. During the quarter,
sales for the Food and Ingredients segment were $832 million, 8%
ahead of last year. The increase reflects stronger volumes for the
Lamb Weston specialty potato operations and Gilroy Foods vegetable
operations, as well as higher prices and better mix across several
product lines. Segment operating profit was $106 million for the
quarter, 10% ahead of the $96 million reported for last year,
primarily reflecting the sales gains. Trading and Merchandising
Segment (8% of first-quarter sales) Trading and merchandising
agricultural commodities, fertilizer, and energy worldwide. During
the quarter, sales for the Trading and Merchandising segment were
$205 million, 21% below year-ago amounts; operating profit was $16
million, 71% below the $54 million reported for last year. As
expected, the profit decrease was primarily driven by less
favorable trading conditions for energy-related products and
agricultural commodities, as well as lower selling prices for the
wholesale fertilizer operations. International Foods Segment (5% of
first-quarter sales) Branded consumer products sold internationally
to retail channels. During the quarter, sales for the International
Foods segment were $142 million, 1% below year-ago amounts. Segment
operating profit was $13 million for the quarter; the operating
profit in the year-ago period was $10 million, which included $6
million of expense associated with a plant closure. Other Items --
Corporate expense was $90 million for the quarter, including $13
million of expense related to restructuring charges; the $77
million of corporate expense excluding restructuring charges
compares with $73 million in the year-ago period. -- Equity method
investment earnings were $2 million for the first quarter. For the
same quarter last year, equity investments posted a loss of $14
million and included approximately $19 million of impairment
charges. -- Net interest expense for the quarter was $58 million
compared with $72 million last year, reflecting significant debt
repayment over the last year and improved working capital
management. -- The effective tax rate for continuing operations for
the quarter was 36%. The company expects 36% to be the effective
tax rate on continuing operations going forward. Capital Items
Regarding transactions, the company: -- Reached an agreement to
sell its refrigerated packaged meats businesses to Smithfield Foods
(NYSE:SFD), which is expected to close before Oct. 31, 2006, --
Completed the divestiture of its cheese business, and -- Sold its
interest in a malt joint venture after the close of the quarter. --
Expects pretax proceeds for the meats, cheese, and malt
transactions to be approximately $650 million after related
expenses. -- Sold its note receivable from Swift Foods for
approximately $117 million after the close of the quarter. -- The
company repurchased approximately 2.4 million shares of common
stock during the first quarter at a total cost of approximately $53
million. -- Dividends paid during the quarter totaled $93 million
versus $141 million last year. -- For the quarter, capital
expenditures from continuing operations for property, plant, and
equipment were $46 million compared with $61 million in the
year-ago period. Depreciation and amortization expense from
continuing operations was approximately $89 million for the
quarter; this compares with a total of $75 million in the year-ago
period. Outlook The company is raising its overall fiscal 2007 EPS
expectations from continuing operations by $0.05 per diluted share
to a range of $1.17 - $1.22. Those amounts exclude items impacting
comparability and any additional benefit from applying divestiture
proceeds. The company will comment further on its fiscal 2007 EPS
expectations as the fiscal year progresses and as the company
finalizes the timing and amount of increased marketing investment
and cost savings, as well as the application of divestiture
proceeds. Accounting Method Change During the first quarter, the
company changed its method of accounting for advertising expense
for interim periods so that all advertising expense is recognized
as incurred. Previously, the company recognized advertising costs
in interim periods based upon sales volumes for the interim period
as a proportion of estimated annual sales volumes. Prior periods
have been restated to reflect this change. The method change will
alter the quarterly distribution of advertising expense, although
the change will have no impact on total advertising expense
reported for the current or any prior fiscal year. The impact of
the change on the first quarter fiscal 2007 results was not
material. In the second quarter, the company currently expects the
change in accounting to result in $0.02 to $0.04 per diluted share
of additional advertising expense that would have been recognized
later in the year under the previous method. Independent of the
method change, the company expects increased marketing investment
in the balance of the fiscal year related to its innovation and
sales growth initiatives. Changes to Historical Amounts The
accounting method change discussed above, the reclassification of
one of the company's smaller businesses to discontinued operations,
and the reclassification of interest expense from cost of goods
sold within the Food and Ingredients segment resulted in some
changes to historical amounts. Please see the question-and-answer
supplement for this release, which provides historical amounts
reflecting these changes; this document can be found at
www.conagrafoods.com/investors. Preliminary Results Today's results
are preliminary because the results of discontinued operations have
not yet been finalized to reflect items being adjusted in
preparation for the closing of the sale of the refrigerated meats
transaction; these adjustments are customary in transactions of
this nature and may affect the results from discontinued operations
in the first quarter. EPS from discontinued operations, excluding
pending items related to the refrigerated meats divestiture and a
gain of approximately $0.07 per share from other divestitures
completed during the quarter, was in the range of the $0.05
contributed by discontinued operations in the year-ago period. The
company will provide the results of its discontinued operations in
its 10-Q filing. Major Items Affecting First-Quarter Fiscal 2007
EPS Comparability Included in the $0.21 diluted EPS from continuing
operations for the first quarter of fiscal 2007 (EPS amounts
rounded and after tax): -- Expense of $0.05 per diluted share, or
$39 million pretax, for restructuring charges related to programs
designed to reduce the company's ongoing operating costs. These are
reflected as $26 million of expense within the Consumer Foods
segment and $13 million of corporate expense. Included in the $0.61
diluted EPS from continuing operations for the first quarter of
fiscal 2006 (EPS amounts after tax): -- Gain of $0.40 per diluted
share, or $329 million pretax, 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,
or $19 million pretax, resulting from asset impairment charges
associated with two equity method investments, and classified
within the results of equity method investments. -- Expense of
$0.01 per diluted share, or $6 million pretax, related to plant
closure costs included as part of the results for the International
Foods segment. Discussion of Results ConAgra Foods will host a
conference call at 9:30 a.m. EDT today 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 1-800-811-8830 and 1-913-981-4904,
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 pass code will be required. Domestic participants should
dial 1-888-203-1112 and international participants should dial
1-719-457-0820 and enter pass code 6705460. A rebroadcast also will
be available on the company's Web site. 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. Annual Stockholders'
Meeting Webcast The company will webcast its Fiscal 2006 Annual
Stockholders' Meeting on Thursday, Sept. 28, 2006. This event will
be webcast live beginning at 2:30 p.m. EDT. The webcast will be
archived starting at 4:30 p.m. EDT on Thursday, Sept. 28 and can be
accessed at www.conagrafoods.com/investors. 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. The company undertakes no responsibility
to update these statements. 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, availability and prices of raw materials,
product pricing, competitive environment and related market
conditions, operating efficiencies, the company's ability to
execute its operating and restructuring plans, 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 (unaudited) In millions FIRST QUARTER
-------------------------------- 13 Weeks 13 Weeks Ended Ended
----------- ----------- -------- August 27, August 28, Percent 2006
2005 Change ----------- ----------- -------- SALES ----- Consumer
Foods $1,509.6 $1,499.5 0.7% Food and Ingredients 831.5 770.5 7.9%
Trading and Merchandising 205.4 260.0 (21.0)% International Foods
142.1 143.8 (1.2)% ----------- ----------- Total 2,688.6 2,673.8
0.6% ----------- ----------- OPERATING PROFIT ----------------
Consumer Foods $180.6 $166.4 8.5% Food and Ingredients 106.3 96.4
10.3% Trading and Merchandising 15.6 53.5 (70.8)% International
Foods 13.1 10.3 27.2% ----------- ----------- Total operating
profit for segments 315.6 326.6 (3.4)% 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 (89.8)
(72.9) 23.2% Gain on sale of Pilgrim's Pride Corporation common
stock - 329.4 (100.0)% Interest expense, net (58.0) (72.4) (19.9)%
----------- ----------- Income from continuing operations before
income taxes and equity method investment earnings (loss) 167.8
510.7 (67.1)% =========== =========== 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 - CONTINUING OPERATIONS ONLY (unaudited) In
millions, except per share amounts FIRST QUARTER
-------------------------------- 13 Weeks 13 Weeks Ended Ended
----------- ----------- -------- August 27, August 28, Percent 2006
2005 Change ----------- ----------- -------- Net sales $2,688.6
$2,673.8 0.6% Costs and expenses: Cost of goods sold 2,025.6
2,003.1 1.1% Selling, general and administrative expenses 437.2
417.0 4.8% Interest expense, net 58.0 72.4 (19.9)% 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) 167.8
510.7 (67.1)% Income tax expense 61.5 177.6 (65.4)% Equity method
investment earnings (loss) 2.2 (13.9) NA ----------- -----------
Income from continuing operations $108.5 319.2 (66.0)% ===========
=========== Earnings per share - basic Income from continuing
operations $0.21 $0.62 (66.1)% =========== =========== Weighted
average shares outstanding 510.2 518.1 (1.5)% ===========
=========== Earnings per share - diluted Income from continuing
operations $0.21 $0.61 (65.6)% =========== =========== Weighted
average share and share equivalents outstanding 512.4 520.5 (1.6)%
=========== =========== ConAgra Foods Consolidated Balance
Sheets(a) (unaudited) In millions August 27, August 28, 2006 2005
------------ ------------ ASSETS Current assets Cash and cash
equivalents $695.3 $501.4 Receivables, less allowance for doubtful
accounts of $26.3 and $31.1 1,156.1 1,252.3 Inventories 2,123.1
2,296.3 Prepaid expenses and other current assets 750.2 736.9
Current assets held for sale 219.8 503.0 ------------ ------------
Total current assets 4,944.5 5,289.9 Property, plant and equipment,
net 2,212.9 2,348.5 Goodwill 3,444.6 3,447.3 Brands, trademarks and
other intangibles, net 797.4 800.6 Other assets 228.3 444.4
Noncurrent assets held for sale 385.1 851.8 ------------
------------ $12,012.8 $13,182.5 ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes
payable $8.2 $10.8 Current installments of long-term debt 421.8
119.1 Accounts payable 892.2 899.4 Advances on sales 107.6 128.8
Accrued payroll 243.0 192.5 Other accrued liabilities 1,276.1
1,329.4 Current liabilities held for sale 2.7 50.5 ------------
------------ Total current liabilities 2,951.6 2,730.5 Senior
long-term debt, excluding current installments 2,752.0 3,943.5
Subordinated debt 400.0 400.0 Other noncurrent liabilities 1,190.6
1,116.9 Noncurrent liabilities held for sale - 5.0 Common
stockholders' equity 4,718.6 4,986.6 ------------ ------------
$12,012.8 $13,182.5 ============ ============ (a) See discussion of
Preliminary Results on page 6. *T
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