ConAgra Foods, Inc., (NYSE: CAG) one of North America�s leading
packaged food companies, today reported results for the fiscal 2008
third quarter ended Feb. 24, 2008. Current-quarter diluted EPS from
continuing operations was $0.63; items impacting comparability did
not have a significant net effect on EPS. Prior-year diluted EPS
from continuing operations of $0.37 included net expense of $0.07
from items impacting comparability. Items impacting comparability
in the current and prior years are summarized toward the end of
this release. Gary Rodkin, chief executive officer of ConAgra
Foods, commented, �Our Food & Ingredients segment had terrific
results, and our Consumer Foods segment demonstrated top-line
progress. Consumer Foods sales grew 8%, or 6% on a comparable
basis, and pricing played a larger role in that segment�s sales
performance. I congratulate our team on the successes and
improvements to date, and expect momentum to build as we go
forward.� He continued, �As we announced earlier today, we have
entered an agreement to divest our Trading & Merchandising
operations. The deal is the right strategic step for us, and the
timing underscores our confidence in our core food businesses. The
transaction does not change our EPS growth commitments. While
profits from the Trading & Merchandising operations have been
extremely high over the past four quarters due to unprecedented
volatility in commodities markets, our sole focus is on more
repeatable earnings and cash flow growth from our core food
operations. Due to the innovation, pricing, marketing, and
cost-saving initiatives under way, we are confident the foundation
has been set for strong future profitability.� Consumer Foods
Segment (51% of year-to-date sales) Branded consumer products sold
in retail and foodservice channels; excludes international consumer
operations. Volume & Sales Data � Year-over-year % Change � �
As Reported � Comparable(a) Unit Volumes � 6% � 4% Overall Sales �
8% � 6% Sales of Priority Investment Brands � 7% � 4% Sales of
Enabler Brands � 11% � 11% (a) Comparable sales calculations
exclude the impact of 1) sales contributed by the Peter Pan and
private label peanut butter businesses in the current and prior
year, 2) sales contributed by the Banquet and private label pot pie
businesses in the current and prior year, 3) sales for Alexia
Foods, which was acquired during Q1 of fiscal 2008, and 4) sales
for Lincoln Snacks, which was acquired during Q2 of fiscal 2008.
See page 10 for Regulation G reconciliations. Sales for the
Consumer Foods segment grew 8% as reported to $1.8 billion,
primarily reflecting good volume performance and net price
increases. Operating profit of $207 million was below $225 million
in the year-ago period primarily due to high input cost inflation.
The following segment commentary relates to comparable performance
unless otherwise indicated: Consumer Foods� comparable sales grew
6%, reflecting 4 points of growth from volume and approximately 2
points of growth from pricing. Comparable sales for priority
investment brands, which represent more than 70% of segment sales,
increased 4%; this reflects net price increases, the benefit of new
products, and more effective marketing. Major priority investment
brands posting sales increases for the quarter include Banquet, Egg
Beaters, Healthy Choice, Hebrew National, Hunt�s, Marie
Callender�s, Orville Redenbacher�s, PAM, Slim Jim and Swiss Miss.
Sales for Healthy Choice grew by more than 20%, reflecting
significant new items and stronger advertising. More details about
brand results can be found in the Q&A document accompanying
this release. Comparable sales for enabler brands increased 11%,
partly reflecting higher pass-through pricing for cooking oil and
related products. Operating profit declined 8% as reported; the
comparable decline was 26%, as detailed on page 10. The current
quarter�s high operating costs primarily reflect a challenging
input cost environment, which negatively impacted cost of goods
sold by approximately $130 million. Substantial pricing actions
that took effect this week should benefit this segment�s operating
profits in the future. Food and Ingredients Segment (30% of
year-to-date 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 $1.0 billion, 24%
ahead of last year. The increase was driven largely by higher wheat
values in the milling operations (discussed below), as well as
stronger prices and slightly increased volumes for the Lamb Weston
specialty potato and appetizer operations. Segment operating profit
was $144 million for the quarter, 33% ahead of year-ago amounts.
Increases in values for wheat positions allowed the milling
operations to manage through volatile wheat input costs and
significantly increase profitability, as did higher flour prices
necessitated by higher input costs. Segment profit growth also
reflects Lamb Weston�s export and appetizer sales growth. Trading
and Merchandising Segment (14% of year-to-date sales) Trading and
merchandising agricultural commodities, fertilizer, and energy
worldwide. During the quarter, sales for the Trading and
Merchandising segment were $564 million, 92% ahead of year-ago
amounts; operating profit was $199 million, more than three times
the dollar amount earned in the year-ago period. Agricultural
trading and merchandising, most notably for wheat, posted a very
strong quarter by capitalizing on continued unprecedented market
volatility; fertilizer profits also grew, reflecting rising prices
and continued strong domestic and global demand. Energy trading
results improved slightly over the prior year. As communicated in
the company�s press release earlier today (March 27, 2008), the
company has entered an agreement to divest this segment and expects
the transaction to be complete within the next 60 days. For
additional information on this pending transaction, including
details on customary closing conditions, refer to that release and
the related 8-K. International Foods Segment (5% of year-to-date
sales) Branded consumer products sold internationally to retail
channels. During the quarter, sales for the International Foods
segment were $165 million, 6% ahead of year-ago amounts. Excluding
the benefit of a weaker dollar, sales declined approximately 1%.
Mexico, the Caribbean, and Latin America posted increased sales,
with the strongest overall segment category performances coming
from popcorn, cooking oil, and cooking sprays. Sales in Canada, the
largest geographic market in the segment, were below strong
year-ago amounts. Operating profit of $13 million was 16% below
year-ago amounts, as reported, due to $6 million of restructuring
costs related to SG&A efficiency initiatives. Excluding these
restructuring costs in the current quarter, as well as $2 million
of peanut butter recall costs in the year-ago period, operating
profit was ahead of comparable year-ago amounts. Other Items
Corporate expense was $84 million for the quarter and $86 million
in the year-ago period. Equity method investment earnings were $45
million for the third quarter, significantly above $10 million in
the year-ago period, reflecting strong results for a potato
processing joint venture and a grain export joint venture. Net
interest expense was $62 million in the current quarter and $56
million in the year-ago period. The effective tax rate was 33% in
the current quarter; the EPS impact of the lower-than-expected tax
rate is listed as an item impacting comparability. The company
continues to project fiscal 2008�s effective tax rate to be in the
range of 34%-35% for continuing operations, excluding items
impacting comparability. Capital Items Dividends paid during the
quarter totaled $93 million versus $91 million last year. For the
quarter, capital expenditures from continuing operations for
property, plant, and equipment were $72 million compared with $147
million in the year-ago period. Depreciation and amortization
expense from continuing operations was approximately $78 million
for the quarter; this compares with a total of $91 million in the
year-ago period. Subsequent to quarter end, ConAgra Foods� Lamb
Weston purchased Watts Brothers Farms, which owns and operates
agricultural and farming businesses in Washington and Oregon. In
addition to being a leading supplier of vegetables, Watts Brothers
also expands Lamb Weston's potato growing operations. The purchase
price was approximately $130 million in cash, plus the assumption
of approximately $85 million of interest-bearing debt. Outlook --
The company expects fiscal 2008 EPS to be in the range of
$1.80-$1.85, excluding items impacting comparability. Given that
the Trading & Merchandising transaction is expected to be
completed over the next few months, Trading & Merchandising
results likely will be classified as discontinued operations in
future financial statements. � -- While several details of the
fiscal 2009 operating plans are still being finalized, the company
currently expects fiscal 2009 EPS, excluding items impacting
comparability, to be at least $1.55. Due to the pending
transaction, the company is assuming no operating profit from
Trading & Merchandising operations in its fiscal 2009 EPS
estimates, but is assuming EPS benefit from allocating transaction
proceeds primarily toward share repurchases and from interest
income on the note receivable from the buyer. The company expects
strong margins and operating profitability for the core food
operations in fiscal 2009 due to the innovation, pricing,
marketing, and cost-saving initiatives under way. After the fiscal
2009 operating plans are finalized, the company will provide more
specificity regarding fiscal 2009 expectations with its fiscal 2008
fourth-quarter earnings release scheduled for June 26, 2008. Major
Items Affecting Third-quarter Fiscal 2008 EPS Comparability
Included in the $0.63 diluted EPS from continuing operations for
the third quarter of fiscal 2008 (EPS amounts rounded and after
tax): Expense of $0.02 per diluted share, or $14 million pretax,
for restructuring charges related to programs designed to reduce
the company�s ongoing operating costs. These costs are reflected
within the Consumer Foods (costs of goods sold of $2 million and
SG&A expense of $6 million) and International Foods segments
(cost of goods sold of $2 million and SG&A expense of $4
million). Benefit of $0.02 per diluted share due to a
lower-than-normal tax rate. Included in the $0.37 of diluted EPS
from continuing operations 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 costs are reflected within the Consumer Foods segment (cost
of goods sold of $18 million and SG&A 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. The peanut butter recall last year 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.
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
1-877-704-5380 and 1-913-312-1231, respectively. No confirmation or
pass code is needed. This conference call also can be accessed live
on the Internet at http://investor.conagrafoods.com. 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
5085364. 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
http://investor.conagrafoods.com. To view recent company news,
please visit http://media.conagrafoods.com. 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. For more
information, please visit us at www.conagrafoods.com. Note on
Forward-looking Statements: This release contains forward-looking
statements. 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 for updating 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, the
company�s ability to complete the pending Trading &
Merchandising transaction, future economic circumstances, industry
conditions, the company�s ability to execute its operating and
restructuring plans, availability and prices of raw materials,
product pricing, competitive environment and related market
conditions, operating efficiencies, the ultimate impact of the
company�s recalls, 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. Regulation G
Disclosure Consumer Foods Segment Below is a reconciliation of
segment sales and operating profit exclusive of the pot pie
business, the peanut butter business, Alexia Foods business,
Lincoln Snacks business, recall costs, and restructuring charges.
Consumer Foods Segment Reconciliations � For Regulation G Purposes
(impacted by rounding) � � � (Dollars in millions) Q3 FY08 Q3 FY07
% Change � Consumer Foods Net Sales $ 1,766 $ 1,632 8 % Pot Pie Net
Sales (29 ) (29 ) Net Sales of Acquired Businesses (Alexia &
Lincoln Snacks) (19 ) - Peanut Butter Net Sales � (33 ) � (14 ) �
Adjusted Consumer Foods Net Sales $ 1,685 � $ 1,589 � 6 % �
(Dollars in millions) Q3 FY08 Q3 FY07 % Change � Priority
Investment Brands Net Sales $ 1,274 $ 1,187 7 % Banquet Pot Pie Net
Sales (24 ) (23 ) Net Sales of Acquired Businesses (Alexia &
Lincoln Snacks) (18 ) - Peter Pan Net Sales � (33 ) � (11 ) �
Priority Investment Brands Adjusted Net Sales $ 1,199 � $ 1,153 � 4
% � (Dollars in millions) Q3 FY08 Q3 FY07 % Change � Enabler Brands
Net Sales $ 492 $ 445 11 % Private Label Pot Pie Net Sales (5 ) (6
) Private Label Net Sales of Acquired Businesses (1 ) - Private
Label Peanut Butter Net Sales � - � � (3 ) � Enabler Brands
Adjusted Net Sales $ 486 � $ 436 � 11 % � (Dollars in millions) Q3
FY08 Q3 FY07 % Change � Consumer Foods Segment Operating Profit $
207 $ 225 -8 % Peter Pan Recall Costs - 47 Restructuring Plan
Charges/Benefits � 8 � � 20 � � Consumer Foods Segment Adjusted
Operating Profit $ 215 � $ 292 � -26 % ConAgra Foods, Inc. � � �
Segment Operating Results In millions THIRD QUARTER � 13 Weeks
Ended 13 Weeks Ended � February 24, 2008 February 25, 2007 Percent
Change SALES Consumer Foods $ 1,765 .6 $ 1,631 .9 8 .2% Food and
Ingredients 1,034 .2 837 .4 23 .5% Trading and Merchandising 563 .6
293 .3 92 .2% International Foods 165 .0 155 .8 5 .9% Total 3,528
.4 2,918 .4 20 .9% � OPERATING PROFIT Consumer Foods $ 206 .6 $ 224
.9 (8 .1)% Food and Ingredients 143 .8 108 .4 32 .7% Trading and
Merchandising 198 .9 62 .3 219 .3% International Foods 12 .7 15 .1
(15 .9)% Total operating profit for segments 562 .0 410 .7 36 .8% �
Reconciliation of total operating profit to income from continuing
operations before income taxes and equity method investment
earnings Items excluded from segment operating profit: General
corporate expense (83 .6) (85 .9) (2 .7)% Interest expense, net (62
.1) (56 .1) 10 .7% Income from continuing operations before income
taxes and equity method investment earnings $ 416 .3 $ 268 .7 54
.9% Segment operating profit excludes general corporate expense,
equity method investment earnings 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 � February 24, 2008
February 25, 2007 Percent Change SALES Consumer Foods $ 5,127 .7 $
4,920 .5 4 .2% Food and Ingredients 2,937 .9 2,524 .0 16 .4%
Trading and Merchandising 1,437 .0 796 .0 80 .5% International
Foods 492 .4 455 .2 8 .2% Total 9,995 .0 8,695 .7 14 .9% �
OPERATING PROFIT Consumer Foods $ 617 .0 $ 684 .9 (9 .9)% Food and
Ingredients 395 .3 329 .2 20 .1% Trading and Merchandising 439 .0
116 .8 275 .9% International Foods 38 .7 46 .9 (17 .5)% Total
operating profit for segments 1,490 .0 1,177 .8 26 .5% �
Reconciliation of total operating profit to income from continuing
operations before income taxes and equity method investment
earnings Items excluded from segment operating profit: General
corporate expense (284 .6) (267 .3) 6 .5% Interest expense, net
(184 .9) (166 .2) 11 .3% Income from continuing operations before
income taxes and equity method investment earnings $ 1,020 .5 $ 744
.3 37 .1% Segment operating profit excludes general corporate
expense, equity method investment earnings 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 � February 24, 2008 February
25, 2007 Percent Change Net sales $ 3,528 .4 $ 2,918 .4 20 .9 %
Costs and expenses: Cost of goods sold 2,555 .4 2,143 .4 19 .2 %
Selling, general and administrative expenses 496 .6 450 .2 10 .3 %
Interest expense, net � 62 .1 � � 56 .1 10 .7 % Income from
continuing operations before income taxes and equity method
investment earnings 416 .3 268 .7 54 .9 % Income tax expense 151 .5
91 .8 65 .0 % Equity method investment earnings � 45 .3 � � 9 .6
371 .9 % Income from continuing operations 310 .1 186 .5 66 .3 % �
Income (loss) from discontinued operations, net of tax � (1 .0) � 6
.1 NA � Net income $ 309 .1 � $ 192 .6 60 .5 % � Earnings per share
� basic � Income from continuing operations $ 0 .64 $ 0 .37 73 .0 %
Income (loss) from discontinued operations � (0 .01) � 0 .01 NA Net
income $ 0 .63 � $ 0 .38 65 .8 % � Weighted average shares
outstanding � 487 .5 � � 503 .1 (3 .1 )% � Earnings per share �
diluted � Income from continuing operations $ 0 .63 $ 0 .37 70 .3 %
Income (loss) from discontinued operations � - � � � 0 .01 (100 .0
)% Net income $ 0 .63 � $ 0 .38 65 .8 % � Weighted average share
and share equivalents outstanding � � 490 .6 � � 506 .7 (3 .2 )%
ConAgra Foods, Inc. � � � � Consolidated Statements of Earnings In
millions, except per share amounts THIRD QUARTER 39 Weeks Ended 39
Weeks Ended � February 24, 2008 February 25, 2007 Percent Change
Net sales $ 9,995.0 $ 8,695.7 14.9 % Costs and expenses: Cost of
goods sold 7,362.8 6,447.4 14.2 % Selling, general and
administrative expenses 1,426.8 1,337.8 6.7 % Interest expense, net
� 184.9 � � 166.2 11.3 % Income from continuing operations before
income taxes and equity method investment earnings 1,020.5 744.3
37.1 % Income tax expense 371.8 272.4 36.5 % Equity method
investment earnings � 80.7 � � 24.4 230.7 % Income from continuing
operations 729.4 496.3 47.0 % � Income (loss) from discontinued
operations, net of tax � (0.1 ) � 76.3 NA � Net income $ 729.3 � $
572.6 27.4 % � Earnings per share � basic � Income from continuing
operations $ 1.49 $ 0.98 52.0 % Income (loss) from discontinued
operations � - � � 0.15 (100.0 )% Net income $ 1.49 � $ 1.13 31.9 %
� Weighted average shares outstanding � 488.1 � � 507.3 (3.8 )% �
Earnings per share � diluted � Income from continuing operations $
1.48 $ 0.97 52.6 % Income (loss) from discontinued operations � - �
� 0.15 (100.0 )% Net income $ 1.48 � $ 1.12 32.1 % � Weighted
average share and share equivalents outstanding � � 491.5 � � 510.1
(3.6 )% ConAgra Foods, Inc. � � Consolidated Balance Sheets In
millions February 24, 2008 February 25, 2007 ASSETS Current assets
Cash and cash equivalents $ 128 .2 $ 497 .0 Receivables, less
allowance for doubtful accounts of $25.7 and $24.7 1,449 .0 1,194
.4 Inventories 3,610 .3 2,819 .8 Prepaid expenses and other current
assets � 1,147 .6 � 1,073 .2 Total current assets 6,335 .1 5,584 .4
� Property, plant and equipment, net 2,376 .4 2,214 .4 Goodwill
3,507 .3 3,440 .8 Brands, trademarks and other intangibles, net 804
.0 795 .6 Other assets � 363 .9 � 245 .4 $ 13,386 .7 $ 12,280 .6
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes
payable $ 418 .0 $ 22 .7 Current installments of long-term debt 14
.8 21 .0 Accounts payable 1,353 .7 935 .5 Other accrued liabilities
� 1,966 .3 � 2,125 .4 Total current liabilities 3,752 .8 3,104 .6 �
Senior long-term debt, excluding current installments 3,175 .9
3,235 .8 Subordinated debt 200 .0 200 .0 Other noncurrent
liabilities 1,219 .5 1,074 .3 Common stockholders' equity � 5,038
.5 � 4,665 .9 $ 13,386 .7 $ 12,280 .6
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