ConAgra Foods, Inc. (NYSE:CAG), one of North America�s leading
packaged food companies, today reported results for the fiscal 2007
third quarter ended Feb. 25, 2007. Third-quarter diluted EPS was
$0.38, which includes $0.06 per diluted share of costs related to
the recent peanut butter recall. In the year-ago period, the
company reported diluted EPS of ($0.05), including $0.38 per share
of net expense from items that impacted comparability. Major items
impacting comparability in the current and prior year are
summarized toward the end of this release. Gary Rodkin, chief
executive officer of ConAgra Foods, commented, �I congratulate our
team on a strong EPS performance, particularly in light of the fact
that we were able to offset significant costs associated with the
peanut butter recall, and still increase our marketing investment.
We clearly are making progress with our ongoing initiatives to
reduce operating costs and expand margins, and we are improving
execution. Given our operating progress to date, as well as trading
profits that have been stronger than planned so far this fiscal
year, we are comfortable that EPS will be toward the high end of
our EPS guidance range for fiscal 2007.� Regarding the recent
peanut butter recall, Rodkin said, �As most of our consumers,
customers and investors know, toward the end of the quarter we
initiated a recall of 100 percent of our peanut butter products
following reports of Salmonella contamination. We are truly sorry
for any harm that our peanut butter products may have caused. I
want to assure our consumers, customers, investors and employees
that we are correcting the operational problems that led to this,
and are committed to the highest possible standards of food safety
throughout our operations. We also intend to resolve all claims
related to peanut butter fairly and expeditiously and do not
believe the costs of resolving the claims will materially impact
our future operating results.� The company currently estimates that
the cost of the peanut butter recall will approximate $50 million
to $60 million, largely reflecting the costs associated with
customer and consumer product returns, inventory write-offs and
projected legal costs. Of this amount, $48 million was recognized
in the third quarter; most of the remainder is expected to be
recognized in the fourth quarter of fiscal 2007. Consumer Foods
Segment (56% of YTD sales) Branded consumer products sold in retail
and foodservice channels; excludes international consumer
operations. For the quarter, sales for the Consumer Foods segment
were $1.6 billion, 2% below last year due to the peanut butter
recall and the recent divestiture of a refrigerated pizza business.
Overall sales increased 1%, excluding the peanut butter business in
current and prior-year results as well as amounts in the year-ago
period from businesses since divested. See page 9 for Regulation G
reconciliations. Segment unit volumes declined 1% in the quarter;
excluding the peanut butter business and the impact of divested
businesses in prior year results, volume increased 1% in the
current quarter. Sales for the company�s priority investment brands
as a whole, which represented slightly more than 75% of the segment
sales, decreased 1%. Excluding peanut butter sales in current and
prior-year results, sales for priority investment brands as a whole
were slightly higher than in the year-ago period; in particular,
Hebrew National, Manwich, Marie Callender�s, Orville Redenbacher�s,
PAM, and Snack Pack posted sales gains greater than 5%. The company
noted that proactively changing product mix and reducing depth of
promotion for some key priority investment brands has delayed
top-line progress, but strengthened the base of the business and
enhanced profit margins. Sales for the remaining brands and
products declined 2% due to the divestiture of a small refrigerated
pizza business in the second quarter of fiscal 2007. Sales for this
portion of the segment increased slightly excluding the
contribution from that divested business in prior-year amounts. A
list of major brand sales gains and declines is included in the
question-and-answer supplement to this release and is posted on the
company�s Web site. Segment operating profit was $224 million for
the quarter, 2% ahead of year-ago amounts, despite significant
current-quarter recall, marketing and restructuring costs.
Current-quarter operating profit includes $47 million of costs
related to the peanut butter recall, $26 million of increased
advertising and promotion investment, and $20 million of
restructuring costs. Prior-year operating profit of $220 million
includes $41 million of restructuring costs. The company is pleased
that its progress with cost savings and product mix has allowed it
to grow earnings while fueling reinvestment for the future. Food
and Ingredients Segment (30% of YTD sales) Specialty potato,
vegetable, seasoning blends, flavors, and milled grain products
sold to foodservice and commercial channels worldwide. For the
quarter, sales for the Food and Ingredients segment were $852
million, 8% ahead of last year. Each of the major operations - Lamb
Weston (specialty potato products), ConAgra Mills (milled
products), Gilroy Foods (vegetables) and Spicetec (seasoning
blends, flavors) - posted top-line growth due to better volumes,
mix and pricing. Segment operating profit was $109 million for the
quarter, 36% ahead of year-ago amounts as each of the major product
lines listed above posted year-over-year growth. The overall profit
increase reflects the strong sales performance, as well as better
mix and successful focus on cost management. Trading and
Merchandising Segment (9% of YTD sales) Trading and merchandising
agricultural commodities, fertilizer and energy worldwide. For the
quarter, sales for the Trading and Merchandising segment were $293
million, 5% ahead of year-ago amounts. Segment operating profit
reached a record $62 million, 3% ahead of year-ago amounts. The
sales and profit growth reflects stronger results for fertilizer
operations, as well as agricultural trading and merchandising
operations, and lower profits from energy trading. International
Foods Segment (5% of YTD sales) Branded consumer products sold
internationally to retail channels. For the quarter, sales for the
International Foods segment were $154 million, 3% above year-ago
amounts. Largely due to better results for Canadian operations,
segment operating profit of $15 million was slightly ahead of
year-ago amounts despite approximately $2 million of peanut butter
recall costs in the current quarter. Other Items Corporate expense
was $86 million for the quarter and $171 million in the year-ago
period. Current quarter amounts include $5 million of benefit from
a legal settlement. The year-ago period included $73 million of net
expense from several items impacting comparability, summarized
toward the end of this document. Equity method investment earnings
were $10 million for the current quarter. For the same quarter last
year, equity investments posted a loss of $1 million, largely
driven by $9 million of impairment charges on assets the company no
longer owns. Net interest expense for the quarter was $56 million,
compared with $69 million last year, primarily reflecting debt
repayment. During the quarter, the company revised its expected tax
rate for fiscal 2007 to 35% from 36%, excluding items impacting
comparability; this revision resulted in a 33% effective tax rate
for the quarter. The lower-than-normal tax rate provided
approximately $0.01 of EPS benefit during the quarter. Capital
Items -- The company repurchased approximately 7.4 million shares
of common stock during the third quarter at a total cost of
approximately $197 million. At quarter-end, the company had
approximately $300 million of authorized repurchases remaining
under its existing share repurchase program. -- Dividends paid
during the quarter totaled $91 million, versus $141 million last
year. -- For the quarter, capital expenditures from continuing
operations for property, plant and equipment were $147 million,
compared with $54 million in the year-ago period. Depreciation and
amortization expense from continuing operations was approximately
$91 million for the quarter; this compares with a total of $78
million in the year-ago period. -- During the quarter, the company
contributed approximately $106 million to its pension plans; fiscal
year-to-date plan contributions total approximately $170 million.
-- During the quarter, the company conducted an exchange offer that
refinanced a portion of its outstanding long-term debt securities.
-- The company exchanged approximately $200 million of its 9.75%
notes due in 2021 and $300 million of its 6.75% notes due in 2011
for approximately $500 million of 5.82% notes due in 2017 and cash.
-- Cash payments (premium) to exchanging note holders totaled
approximately $90 million; that premium is being amortized over the
life of the new debt. Outlook Given the strong EPS to date
resulting from operating progress as well as better-than-expected
trading profits, the company currently expects its fiscal 2007 EPS
performance to be toward the high end of the range previously
cited, which is $1.28 to $1.33, including the costs of the peanut
butter recall but excluding other items impacting comparability. As
the company publicly communicated on Feb. 20 in its presentation to
the Consumer Analyst Group of New York (CAGNY), the company expects
its sales, marketing and efficiency initiatives, along with its
ongoing share repurchase program, to result in 8% to 10% annual EPS
growth during the fiscal 2008 to 2010 timeframe. Those expectations
exclude any items impacting comparability during the fiscal 2008 to
2010 period. The company begins fiscal 2008 on May 28, 2007. For
more details regarding operating initiatives and financial
expectations for the fiscal 2008 to 2010 timeframe, including
targets for expanded profit margins and returns on capital, please
refer to the company�s Feb. 20 CAGNY presentation, which is
archived at www.conagrafoods.com/investors. Major Items Affecting
Comparability of Third-Quarter Fiscal 2007 EPS Included in the
$0.38 of diluted EPS for the third quarter of fiscal 2007 (EPS
amounts rounded and after tax): Expense of $0.03 per diluted share,
or $20 million pretax, for restructuring charges related to
programs designed to reduce the company�s ongoing operating costs.
These are reflected within the Consumer Foods segment (cost of
goods sold of $18 million and SG&A/Other expense of $2
million). Benefit of $0.01 per diluted share due to a
lower-than-normal tax rate. Benefit of $0.01 per diluted share, or
$5 million pretax, due to a legal settlement, classified as
SG&A expense within corporate. Income of $0.01 per share from
discontinued operations. The company also notes that the recent
peanut butter recall negatively impacted EPS by approximately
($0.06), or $48 million pretax, almost all of which is reflected in
the results for the Consumer Foods segment. Included in the ($0.05)
of diluted EPS from continuing operations for the third quarter of
fiscal 2006 (EPS amounts rounded and after tax): Loss of $0.24 per
diluted share in discontinued operations, largely due to impairment
charges. Expense of $0.06 per diluted share, or $50 million pretax,
for restructuring charges related to programs designed to reduce
the company�s ongoing operating costs. These are classified as $41
million of expense within the Consumer Foods segment (cost of goods
sold of $5 million and SG&A expense of $36 million) and $9
million of SG&A expense within corporate. Expense of $0.06 per
diluted share, or $47 million pretax, for a charge related to a
note receivable from Swift and Company, which is classified as
SG&A expense within corporate. Expense of $0.02 per diluted
share, or $17 million pretax, reflecting the adjustment of a
litigation reserve, which is included within corporate. Benefit of
$0.02 per diluted share due to a lower-than-normal tax rate.
Expense of $0.02 per diluted share, or $9 million pretax, resulting
from asset impairment charges associated with an equity method
investment, and classified within the results of equity method
investment earnings (loss); this amount is not tax-deductible.
Discussion of Results ConAgra Foods will host a conference call at
9:30 a.m. EDT today to discuss third-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
1-800-819-9193 and 1-913-981-4911, 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 on March 22,
2007. 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
4051378. 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. ConAgra Foods, Inc. (NYSE:CAG),
is one of North America's leading 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
document 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 document
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 ultimate impact of the
company�s peanut butter recall, 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 document, which speak only as of the
date made. Regulation G Disclosure Consumer Foods Segment Below is
a reconciliation of segment sales exclusive of the peanut butter
business and divested business sales. Management evaluates the
segment performance and trends exclusive of these items due to the
non-recurring nature of the recall and the impact of divestitures.
Management believes the presentation of financial results exclusive
of these items facilitates investor understanding of the segment�s
performance and trends. 13 Weeks Ended Feb. 25, 2007 Feb. 26, 2006
Percent Change Consumer Segment Sales Reconciliations Sales
(GAAP)(a) $1,619.0� $1,644.4� ���(1.5)% Less: Sales of peanut
butter products 13.6� 37.6� Less: Refrigerated pizza sales --� �
14.5� Adjusted sales $1,605.4� � $1,592.3� �������1% (a) Amount is
net of reversal of approximately $16 million of sales during the
quarter in accordance with GAAP. Forward-Looking FY 07 EPS
Reconciliation Below is a reconciliation of the company�s expected
fiscal year 2007 diluted earnings per share. The company�s guidance
is presented including the costs of the peanut butter recall but
exclusive of other items impacting comparability. Management
believes that this presentation facilitates investor understanding
of the company�s underlying business performance and trends.
YTDFY07 � Diluted EPS-income from continuing operations $ 0.97 �
Restructuring charges 0.12 Non-core asset sales (0.03) After-tax
benefit from sale of Malt JV (0.02) Legal settlements (0.02)
Franchise tax resolution (0.01) Unfavorable tax resolutions and
changes in estimates 0.02 � Diluted EPS-income from continuing
operations, including peanut butter recall costs but excluding
other comparability items $ 1.03 Management expects FY 07 diluted
EPS of $1.28 to $1.33, including the costs of the peanut butter
recall but excluding other comparability items. ConAgra Foods, Inc.
� Segment Operating Results In millions THIRD QUARTER � 13 Weeks
Ended 13 Weeks Ended � Feb. 25, 2007 Feb. 26, 2006 PercentChange
SALES Consumer Foods $ 1,619.0� $ 1,644.4� (1.5)% Food and
Ingredients 851.9� 789.8� 7.9�% Trading and Merchandising 293.3�
278.3� 5.4�% International Foods 154.2� 149.3� 3.3�% Total 2,918.4�
2,861.8� 2.0�% � OPERATING PROFIT Consumer Foods $ 224.2� $ 220.2�
1.8�% Food and Ingredients 109.3� 80.2� 36.3�% Trading and
Merchandising 62.3� 60.6� 2.8�% International Foods 14.9� 14.3�
4.2�% Total operating profit for segments 410.7� 375.3� 9.4�% �
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 (85.9) (170.6) (49.6)% Interest expense,
net (56.1) (68.8) (18.5)% Income from continuing operations before
income taxes and equity method investment earnings (loss) $ 268.7�
$ 135.9� 97.7�% 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
In millions THIRD QUARTER � 39 Weeks Ended 39 Weeks Ended � Feb.
25, 2007 Feb. 26, 2006 PercentChange SALES Consumer Foods $
4,880.8� $ 4,897.1� (0.3)% Food and Ingredients 2,569.1� 2,365.6�
8.6�% Trading and Merchandising 796.0� 826.9� (3.7)% International
Foods 449.8� 448.0� 0.4�% Total 8,695.7� 8,537.6� 1.9�% � OPERATING
PROFIT Consumer Foods $ 681.2� $ 631.2� 7.9�% Food and Ingredients
333.6� 268.5� 24.2�% Trading and Merchandising 116.8� 146.8�
(20.4)% International Foods 46.2� 39.5� 17.0�% Total operating
profit for segments 1,177.8� 1,086.0� 8.5�% � 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
(267.3) (346.6) (22.9)% Gain on sale of Pilgrim�s Pride Corporation
common stock --� 329.4� (100.0)% Interest expense, net (166.2)
(209.8) (20.8)% Income from continuing operations before income
taxes and equity method investment earnings (loss) $ 744.3� $
859.0� (13.4)% 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 THIRD QUARTER 13 Weeks Ended 13
Weeks Ended � Feb. 25, 2007 Feb. 26, 2006 PercentChange Net sales $
2,918.4� $ 2,861.8� 2.0�% Costs and expenses: Cost of goods sold
2,143.4� 2,142.4� 0.0�% Selling, general and administrative
expenses 450.2� 514.7� (12.5)% Interest expense, net 56.1� 68.8�
(18.5)% Income from continuing operations before income taxes and
equity method investment earnings (loss) 268.7� 135.9� ��97.7�%
Income tax expense 91.8� 37.6� 144.1�% Equity method investment
earnings (loss) 9.6� (0.6) NA Income from continuing operations
186.5� 97.7� 90.9�% � Income from discontinued operations, net of
tax 6.1� (122.9) NA � Net income $ 192.6� $ (25.2) NA � Earnings
per share � basic � Income from continuing operations $ 0.37� $
0.19� 94.7�% Income from discontinued operations 0.01� (0.24) NA
Net income $ 0.38� $ (0.05) NA � Weighted average shares
outstanding 503.1� 519.0� (3.1)% � Earnings per share � diluted �
Income from continuing operations $ 0.37� $ 0.19� 94.7�% Income
from discontinued operations 0.01� (0.24) NA Net income $ 0.38� $
(0.05) NA � Weighted average share and share equivalents
outstanding 506.7� 520.9� (2.7)% ConAgra Foods, Inc. � Consolidated
Statements of Earnings In millions, except per share amounts THIRD
QUARTER 39 Weeks Ended 39 Weeks Ended � Feb. 25, 2007 Feb. 26, 2006
PercentChange Net sales $ 8,695.7� $ 8,537.6� 1.9�% Costs and
expenses: Cost of goods sold 6,447.4� 6,416.1� 0.5�% Selling,
general and administrative expenses 1,337.8� 1,382.1� (3.2)%
Interest expense, net 166.2� 209.8� (20.8)% 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) 744.3� 859.0� (13.4)% Income tax expense
272.4� 294.7� (7.6)% Equity method investment earnings (loss) 24.4�
(31.2) NA Income from continuing operations 496.3� 533.1� (6.9)% �
Income from discontinued operations, net of tax 76.3� (58.5) NA �
Net income $ 572.6� $ 474.6� 20.6�% � Earnings per share � basic �
Income from continuing operations $ 0.98� $ 1.03� (4.9)% Income
from discontinued operations 0.15� (0.11) NA Net income $ 1.13� $
0.92� 22.8�% � Weighted average shares outstanding 507.3� 518.6�
(2.2)% � Earnings per share � diluted � Income from continuing
operations $ 0.97� $ 1.02� (4.9)% Income from discontinued
operations 0.15� (0.11) NA Net income $ 1.12� $ 0.91� (23.1)% �
Weighted average share and share equivalents outstanding 510.1�
520.7� (2.0)% ConAgra Foods, Inc. � Consolidated Balance Sheets In
millions February 25, 2007 February 26, 2006 ASSETS Current assets
Cash and cash equivalents $ 497.0� $ 237.2� Receivables, less
allowance for doubtful accounts of $24.7 and $30.2 1,194.4�
1,156.1� Inventories 2,819.8� 2,462.1� Prepaid expenses and other
current assets 1,073.2� 436.5� Current assets held for sale --�
453.7� Total current assets 5,584.4� 4,745.6� � Property, plant and
equipment, net 2,214.4� 2,291.5� Goodwill 3,440.8� 3,447.5� Brands,
trademarks and other intangibles, net 795.6� 799.8� Other assets
245.4� 404.6� Noncurrent assets held for sale --� 668.7� $
12,280.6� $ 12,357.7� LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Notes payable $ 22.7� $ 11.1� Current installments of
long-term debt 21.0� 420.1� Accounts payable 935.5� 866.3� Advances
on sales 266.4� 136.3� Accrued payroll 311.4� 238.9� Other accrued
liabilities 1,547.6� 1,218.5� Current liabilities held for sale --�
43.6� Total current liabilities 3,104.6� 2,934.8� � Senior
long-term debt, excluding current installments 3,235.8� 3,010.9�
Subordinated debt 200.0� 400.0� Other noncurrent liabilities
1,074.3� 1,131.1� Noncurrent liabilities held for sale --� 4.4�
Common stockholders' equity 4,665.9� 4,876.5� $ 12,280.6� $
12,357.7�
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